^mMm^mmmm 


"GBEED  AND  LABOR"  OB  "MONEY  AND  MUSCLE." 

The  one  therm-  of  poets  and  songsters  since  the  world  began  has  been  the  subject  of 
labor.  And  why  nut?  It  is  labor  that  produces  the  wealth  of  every  community — and  greed 
takes  from  this  producing  force  of  brawn  and  muscle  the  richer  benefits.  It  is  admitted  by 
all  thoughtful  people  that  in  the  natural  course  of  events  there  must  be  financiers,  but  they 
are  only  made  possible  by  the  help  of  labor,  assisted  by  its  truest  friend,  nature.  Our  pho- 
tograph is  of  a  painting  by  Mr.  G.  P.  Watts,  an  artist  of  world-wide  reputation,  and  is 
remarkable  from  the  fact  that  it  was  painted  in  his  eighty-fourth  year. 


THE  "SQUARE  DEAL" 

OR  FLASHES  FROM  THE 

BUSINESS  SEARCHLIGHT 

HUMANITY'S  PLEA  FOR  JUSTICE  AND  PROTECTION 
AGAINST  OPPRESSION  BY  THE  GREAT  FINANCIAL  AND 
COMMERCIAL  POWERS  WHOSE  MARVELOUS  GROWTH 
IS    THE    WONDER    OF    THE    TWENTIETH    CENTURY 


GATHERING  A  NATION'S   WEALTH 

From  Field  and   Farm,    Shop   and   Factory.    .Mine   and    Range,    Bi  st 

City  Life,  Etc. 

THE  TRUTH  ABOUT  THE  TRUSTS; 
M'.nky     INTERE8T8,     STANDARD    OlL    MONOPOLY,     BEEF    COMBINE.     RAILWAY 

Mergers,  Et<  . 

.JUGGLING  WITH  THE  PEOPLE'S  MONEY 
At    the    Stock     Km  manges,     Boards    of    Trade.     Banks.     Insurance 

Companies,    Ftc. 

FIGHTING  THE  GAME  OF  "GRAFT" 

Is    National,   state    and    Cm    Government;    the    Business    World, 

Tb  \  des  Unions,   Eti  . 

MUSCLE  AGAINST  MONEY 

The  Stsuoole  Between  Labob   \nd  Capital 
EMBELLISHED    AND    ILLUMINED    BY    HUNDREDS  OF   ILLUSTRATIONS 

BY 

II  E  R  B  ERT     B.     M  U  LFOB  I) 

WAUL    BTREBI    cnl(llt>l'uMil   M      \  Mi    |  I  \  \  \<    I   \  I,    I   I  Ml  i  II!    OK     I  II  I     0HI0AUO    K  \  KM  Mi    POST 

\ND 

TB  UMBULL     Will  rr  E 

u   rBOH  "i       nil    ITOBLD'fl   PBOGBMS,"   "OOH   m.«    POSSESSIONS,' 
Copyright   190G   hy   W.   R.    Vnnnant. 


A   NEW   AMERICAN    DOCTRINE. 

I  < 

\            '*!  shall  go  into  the  presidency  unhampered  by  any  \ 

J      pledge,  promise,  or  understanding  o_f  any  Kind,  sort  or  \ 

description,  sax)e   my   promise   made  to  the  American  ! 

Si 

people,   that  so  far  as   in   my  pobuer  lies  I  shall  see  \ 

\      to    it    that    cVery    man    has    a    square    deal,    no    less  j 

|      and  no   more."  I 

1  i 

c*   c*   os   os   c#  \ 


j 

"\\  e  recognize  the  organization  of  capital  and  the  organization  of 
labor  as  natural  outcomes  of  our  industrial  system.      Each  kind  of  organ- 
ization is  to  bv  favored  so  long  as  it  acts  in  a  spirit  of  justice  and  of  re-       5 
gard  for  the  rights  of  the  other.      Each  is  to  be  granted  the  full  protec-       j 

tion  of  the  law,  and  each  in  turn  is  to  be  held  to  a  strict  obedience  to  the 

I 
law,  for  no  man  is  above  it  and  no  man  below  it.      The  humblest  individual       I 

is  to  have  his  rights  safeguarded  as  scrupulously  as  those  of  the  strong-       i 

est  organization,  for  each  is  to  receive  justice,  no  more  and  no  less.      The       i 

problems  with  which  we  have  to  deal  in  our  modern  industrial  and  social       f 

I 
life  are  manifold:  but  the  spirit   in  which  it  is  necessary  to  approach       | 

their  solution  is  simply  the  spirit  of  honesty,  of  courage  and  of  common       | 

(  | 

sense."  THEODORE  ROOSEVELT.  Q 

K>  K>  K>  K>  K> 

\     ~ 


TLo  Hll  JBelievers 

in  tbe 

(Soloen  IRule 

"Do  'Clnto  ©tbers  as  Jtfou  Woulfc 

Ubat  XTbc\?  Sboulo  Wo  to  U?ou" 

Tlbis  iJBoofe 

©eoicateo 


I 

I  BY     THK    OHIO    SUPREME    COURT,   In    its   decision  of  March  2,   1892, 
<  which  ousted  the  Standard  Oil  Trust  from  the  State: 

4  .  ...  -  .     . 

I  "Experience  shows  that  it  is  not  wise  to  trust  human  cupidity  where 

i  it  has  the  opportunity  to  aggrandize  itself  at  the  expense  of  others." 

B  BY  JOHN   D.  ROCKEFELLER,  JR 

*  "The  American    Beauty  rose  can  be  produced  in  its  splendor  and 

a  fragrance  only  by  sacrificing  the  early  buds  which  grow  up  around  it." 

I  BY    PRESIDENT   THOMAS,  of   Lehigh    Valley   Railroad,  Member  of  Coal 
i  Trust: 

"As  long  as  the  people  are  willing  to  pay  our  price  we  would  be  poor 

i  merchants  not  to  accept  it." 

j 

j  BY  HENRY  H.  ROGERS,  of  the  Standard  Oil   Company   and   mouthpiece 

for  John  D.  Rockefeller: 
!  "Slavery   in   certain   sections   of  the  United   States  was   legal   until 

I  ['resident  Lincoln's  Proclamation  of  Emancipation.     Rebates  were  just 


Notable  Statements  Concerning  Trusts 


as  legal  until  the  passage  of  the  Interstate  Commerce  Act." 

BY  THEODORE  ROOSEVELT,  Author  of  the  American  doctrine  of  the 


BY  WILLIAM  H.   VANDERBILT: 


J  ''square  deal  for  every  •man": 

!  ■"Neither  this  people  nor  any  other  people  will  permanently  tolerate 

a       the  use  of  the  vast  power  conferred  by  vast  wealth — and  especially  by 

Bfl       wealth  in  its  corporate  form — without  lodging  somewhere  in  the  govcrn- 
Hunt  the  still  higher  power  of  seeing  that  this  power  is  used  for  and  not 
f       against  the  interests  of  the  people  as  a  whole." 

I 

j  "I  never  came  in  contact  with  any  class  of  men  as  smart  as  they  are 

!  (  meaning  the  Standard  Oil  people)  in  their  business,  and  I  think  that  a 

f  great  deal  of  their  advantage  is  to  be  attributed  to  that.     They  never 

j  could  have  got  in  the  position  they  are  in  now  without  a  great  deal  of 

|  ability,  and  one  man  would  hardly  have  been  able  to  do  it.      It  is  a  com 

J  bination  of  men.      I  don't  believe  that  by  any  legislative  enactment,  or 

i  anything  else,  through  any  of  the  states  or  all  the  states,  you  can  keep 

L 

ass 


such  men  down.      They  will  be  on  top  all  the  time."  j 


PREFACE 


In  presenting  this  volume  to  the  reading  public,  we  are  frank  to  admit  a  con- 
siderable degree  of  pride  in  its  form  and  contents,  a  pride  which  we  consider  par- 
donable by  virtue  of  the  merit  of  the  matter.  The  American  demand  for  the 
"square  deal"  for  every  man  has  become  insistent  as  it  has  never  been  before,  and 
where  in  former  years  a  single  voice  of  discontent  might  be  heard  here  and  there, 
those  voices  now  have  become  a  chorus  almost  universal  in  the  demand  for  fair 
play  in  the  financial,  industrial  and  political  world. 

The  work  in  hand  is  intended  to  be  a  general  discussion  of  the  relations 
between  public  and  private  affairs  in  our  country.  So  rapid  has  been  the  move- 
ment of  change  in  these  departments  of  human  activity,  that  references  con- 
tinually meet  the  eye  only  to  be  obscure  because  the  facts  leading  up  to  them 
are  not  familiar  to  the  average  reader. 

Says  one  of  the  authors  in  outlining  the  scope  of  the  volume,  "Our  purpose 
from  the  beginning  was  to  write  and  compile  such  material  as  would  be  of  most 
practical  service  to  every  reader  seeking  light  on  the  great  events  of  today. 
Roughly  speaking,  the  contents  of  the  volume  may  be  described  as  including 
everything  bearing  on  the  public  interests  in  industrial,  financial  and  political 
betterment-  in  other  words;  the  expounding  of  the  'square  deal'  policy  by 
■  ipounding  the  evils  and  errors  that  have  stimulated  the  demand  for  the  'square 
deal.'" 

While  the  foregoing  quotation  broadly  defines  the  plan  the  authors  had  in 
view,  it  does  not  do  justice  to  the  comprehensiveness  with  which  they  have 
executed  their  task.  The  work  was  planned  to  be  exhaustive  within  Its  own  field. 
and  well  has  the  plan  been  carried  to  completion. 

The  authors  firsl  have  heated  the  popular  demand  for  fair  play  that  has 
been  voiced  so  sturdily  by  Presidenl  Roosevelt,  indicating  some  of  the  abuses 
thai  stimulated  the  demand,  and  some  of  the  movements  thai  have  beer  made  to 

correct    the  abuses.      \e\l    they  Like  up  for  a   complete  discussion   the  tremendous 

financial  interests  thai  have  assembled  in  a  money  group  of  corporate  magnates. 
The  showing  here  i^  an  Impressive  one,  indicating  thai  a  single  board  of  directors 
represents   interests  controlling  money   t<>   the  amount   of  $11,000,000,000,  or 

!) 


10  PREFACE. 

more  than  one-tenth  of  the  entire  wealth  of  the  United  Slates.  "Who  owns  the 
United  States?*'  is  a  query  which  the  authors  put  to  the  nadir,  and  then  answer 
it  in  a  way  that  i»  genuinely  edifying. 

With  this  fact  as  a  nucleus  the  authors  have  treated  in  fascinating  chapters 
all  the  ramifications  of  tin-  money  power,  tracing  it  through  banks,  life  insurance 
companies,  trust  companies,  railways,  industrial  trusts,  hoards  of  trade,  stock 
exchanges,  ami  every  such  organization  as  enters  into  the  complex  system  of  high 
finance,  if  there  he  one  who  doubts  that  such  solid  and  sober  facts  can  be  of 
interest  to  the  casual  reader,  let  him  but  turn  at  random  to  any  page  in  the  book 
and  discover  for  himself.  For  ourselves,  we  believe  that  the  tremendous  facts 
here  related,  the  stupendous  sums  here  involved,  the  play  of  greed  against  greed 
in  the  struggle  for  sold,  the  rise  and  fall  of  fortunes  and  of  men  in  the  warfare 
of  business,  are  as  theatrical,  as  melodramatic,  as  fascinating  if  you  will,  as  the 
nio-t  exciting  play  ever  staged. 

Here  are  revealed  the  inside  truths  of  the  financial,  industrial  and  business 
world.  Here  are  told  the  secrets  of  Wall  Street  and  of  the  trusts.  There  is  no 
acrimony  in  it,  no  effort  to  argue  for  or  against  the  contending  interests,  but 
merely  the  plain  record  of  the  things  that  have  happened  and  are  happening 
today,  at  least  as  plain  a  record  as  there  can  be  for  facts  so  spectacular. 

But  the  financial  world  is  not  the  only  phase  of  this  work,  although  to  a 
degree  it  i-  the  one  around  which  all  others  revolve.  In  the  end  the  huge  finan- 
cial interests  must  have  a  foundation  on  production  and  industry,  and  so  in  order 
to  preserve  the  balance  and  make  the  facts  complete,  the  authors  have  given 
careful  attention  to  tin  methods  of  trade  and  industry  in  the  United  States  and 
throughout  the  civilized  world. 

For  example,  the  Standard  Oil  Company  is  not  alone  a  financial  institution 
of  almost  inconceivable  influence  and  magnitude,  but  it  is  also  the  greatest  of 
institutions  in  the   actual  production  of  petroleum  and  its  by-products.     The 

!  Trust  is  not  merely  a  monstrous  corporation  for  the  handling  of  financial 
interests,  hut  it  is  also  the  greatest  of  producers  and  manufacturers  of  steel  and 
the  things  that  are  made  from  it.     The  Railway   Mergers  are  not  merely  cor- 

te  schemes  for  controlling  stocks  and  bonds,  but  they  are  also  calculated  for 
the  opt  ration  of  the  greatest  of  railway  systems.  Therefore,  to  make  the  book 
complete,  it  treats  not  only  of  Standard  Oil,  the  Steel  Trust,  and  the  Railway 
Mergers  as  factor-  of  surpassing  importance  in  finance,  but  it  treats  with  full- 
in-  as  well,  the  actual  methods  in  the  petroleum,  steel  and  railway  industries. 
Thesi   are  hut  examples  of  :i  policy  which  is  carried  throughout  the  volume. 

Another  detail  which  is  given  attention  with  like  completeness  and  clearness, 


PREFACE.  11 

is  the  struggle  for  the  political  purification  of  cities,  state  and  nation.  There 
never  was  a  time  when  such  general  interest  was  displayed  toward  this  end,  and 
no  more  hopeful  sign  for  the  welfare  of  our  country  exists  than  this  fact 

The  course  of  controversies  between  labor  and  capital  is  likewise  traced, 
showing  how  these  two  elements  in  national  prosperity  have  come  into  conflict 
and  have  organized  to  battle  against  each  other. 

It  would  be  profitless  to  expand  our  own  summary  of  this  noteworthy  work, 
when  the  volume  is  in  the  reader's  hand.  We  can  hut  call  attention  to  the  fact 
that  it  is  embellished  by  a  large  number  of  carefully  chosen  photographic  illus- 
trations, including  both  scenes  and  portraits.  In  addition  to  these  a  number  of 
carefully  chosen  diagrams  are  included,  which  will  assist  in  making  clear  some 
of  the  more  technical  portions  of  the  work. 

This  book  has  been  prepared  to  be  informing  and  enlightening  rather  than 
argumentative.  The  authors  had  no  politics  to  advocate  or  theories  to  uphold. 
They  have  stated  facts  as  they  found  them.  With  the  belief  that  it  will  be  of 
service  to  every  reader  in  whose  hands  it  is  placed,  the  work  is  presented  by 

THE  PUBLISHERS. 


PROGRESS   AND   SCIENCE    BRING    ALL   NATIONS  INTO  CLOSE  COMMUNICATION. 

In  this  advanci  ean  cables,  wireless  telegraphy,  long-distance  telephones, 

rural  mail  delivery,  fast  railroad  trains,  ocean  greyhounds  -everything  thai  will  put  us  in 
immediate  and  direct  communication  with  our  fellow  men  all  over  the  world.  11  frequently 
happens  that  we  know  more  about  what  is  going  on  at  a  great  distance  than  we  do  of  what 
may  be  transpiring  in  our  own  town  or  among  our  neighbors.  This  illustrates  the  rapid 
age  in  which  we  live — and  consequently,  when  we  come  to  think  of  it  seriously,  the  world 
seems  to  be  growing  smaller. 


CONTENTS 


Page 
.1    Xi'/r  American   Doctrine 6 

■  a  I  inn     7 

XMable   Statements  Concerning    Trusts 8 

ice    9 

Introduction 23 

CHAPTER    I 

THK  CRY  FOR  THE  "SQUARE  DEAL." 

The  Awakening  of  the  People — "Publicity"  Demanded — Government  Investi- 
gations Lead  to  Government  Regulations  .1  General  Movement  for  Fair 
Dealing  in  Business 33 

CHAPTER    II 

THE    ANTI-TRUST    WAVE. 

rnmenta]  Supervision  to  Keep  Apace  with  Industrial  Development  De- 
manded—  The  Cry  for  Reform  in  Business  Ethics — "Big  Money"  Musi 
Not  Be  Allowed  to  Control  the  Law— Right  Li  rim/  and  Right  Thinking 
the  Basis  of  Material  Prosperity  -Our  Government  Musi  Stand  for  Every 
Man,  Rich  or  Poor  Alike  If  II  <  Does  No  Wrong,  He  Shall  Suffer  No 
II  rang 39 

CHAPTER    Ml 

Wllo   o\\\s   THE    UNITED    STATES? 

New  York  the  Financial  Center  of  Our  Nation  Enormous  Influence  of 
Twenty-three  \Len  in  Wall  Street,  Composing  the  Greatest  Money  Power 
in  America  Two  Hundred  Millions  of  Dollars  Deposited  in  One  Hunk — 
Fourteen  Trusts,  Whose  Captains  Are  of  the  National  City  Bank  Direc- 
tory, Represent  Thirty-eight  Per  Cent  of  the  Capitalization  of  All  the 
Industrial    Trusts   of   the   Country     Great   $5,000,000   Banks— Power  of 

i   Companies     World's  Saving    Deposits 50 

18 


U  CONTENTS. 

Page 
CHAPTER    IV 

HOW  MANY  MILLIONS  CHANGE  HANDS— THE  CREDIT  SYSTEM. 

Amount  of  Actual  Money  Needed  in   Huge   Business  Transactions — 
A  rnhi  Per  Cent  of  tin-  Business  of  the   World    Done    on    Credit — I  Fin- 
ns An    Made— The  Clearing  House — The  Cry  Against  Reserve  Abuses 
— Unjust  Distribution  of  Property  and  Wealth 63 

CHAPTER  V 

PERILS   THREATENED    l'.Y    THE    MONLY    TIM' ST— THE  DANGER  OF 

BANK   CONCENTRATION, 

,ng  the  Parting  of  the  Ways  in  the  Field  of  Modern  Hanking — A  Sys- 
l,ni  of  Federation  or  Brotherly  Alliance  a  Probability  of  the  Future — 
/■'•  irs  that  Aggregation  of  Capital  May  Become  More  Powerful  than  the 

ruin, nt   Itself 77 

CHAPTKIJ  VJ 

TI1K    LIFE    INSURANCE    TRUST,    ONE    OF    THE    GREATEST    FINAN- 
(  I  \L  SCANDALS  OF  THF   AGE. 

Money  Power  of  Life  Insurance  Companies — How  the  People's  Savings  Are 
Used  for  Trust  I'm, nations  ami  other  Speculative  Enterprises — The  Scan- 
dal and  Jealous  >lrife  for  Control  of  the  Enormous  Holdings  of  One 
Company — Who  Onus  the  Surplus?— Gleanings  from  the  Committee  Re- 
port       83 

CHAPTER  VII 

STAN  DA  LI)  OIL. 

standard  Oil"  as  a  Financial  System  Are  an  Hundred 
'Finns  as  Important  as  the  Art  mil  Oil  Business  of  that  Concern — Wealth 
of  the  Rockefellers— "Standard  Oil"  Influence  <)i>rill!l  Recognized  in  the 
Management  of  Nearly  Sixty-five  per  rent  of  the  'Fatal  Railway  Mileage 
of  th,    United  States " 115 

CHAPTER  VII] 
THE  TRUST   IN   OIL— THE   STANDARD  OIL  COMPANY. 

How  Advantageous  Transportation  Rates  Called  Discrimination  Helped  BuMd 
a  Gigantic  Monopoly  and  Crush  Out  Competition — The  Faun, as  South 
/„.  ..,/  Company — The  Ohio  Supreme  Court  Ousted  the  Standard 
Oil  Trust  from   thai  Stale— The  Oil  Fields  of  the  World 129 


CONTENTS.  15 

Page 
CHAPTER  IX 

THE  WAR  ON   STANDARD  OIL. 


Kansas  Legislation  Appropriated  Money  for  a  state  Refinery  to  Refine  tin' 
Oil  Produced  in  that  state — The  Pipe  Line  Made  a  Common  Currier  in 
Kansas — "The  Entire  Business  is  Dependent  upon  the  Pipe  Line  System" 
— Signs  now  Point  to  Federal  Control  of  the  Pipe  Lines — Pursuing  a 
Policy  with  the  Motto  "Business  is   War."   13? 

CHAPTER  X 

THE    BEEF   TRUST. 

A  Far-reaehing  Trust,  as  it  Calls  on  Most  ■/■'amities  Three  Times  a  Day — It 
Fixes  Its  Own  Friers  Both  in  the  Buying  of  Lire  Stock  ami  the  Selling 
of  Dressed  Meal — Special  Privilege  Thru  ugh  the  Frirate  Car  System — 
Members  of  the  Beef  Trust  Characterized  as  "the  Most  Arbitrary,  the 
Most  Remorseless,  thai  Have  Free  Bt  en   Known/' i:.l 

CHAPTER  XI 

THE  GREATEST  OF  ALL  MONOPOLIES— THE   RAILROAD  TRUST. 

The  Railroads  Are  the  World's  Greatest  Arteries  of  Commerce — Six  Systems 

('antra/  ur  Dominate   Mare   l/ia,i    lla/f  Hie   Railway  Mileage  of  /lie   Country 

— Rockefeller  and  Railways  A I  mast  as  Suggestive  as  Rockefeller  ami 
Standard  Oil — .1  Qreat  "Community  of  Interests"  Has  Grown  Up  in  the 
Natural   Monopoly  of  Fail  rami   Business 161 

CHAPTER  XII 

DANGER   l\    RAILWAY    MONOPOLY. 

The  Railway  Ts  the  Mother  of  oilier  Monopolies  -Efforts  la  Regulate  Hales 

ami  Prevent   Discrimination   in   Favor  of  Trust  Combinations  as  Against 

mil    Shippers    "The    Freight    Fate    is    the    Life-blood   of   Commercial 

Activity"     "The  Function  of  a  Government  Ts  to  give  Every  Man  a  Fair 

Chance."   ,. . . .    i: ; 

i  ii  \itki:  xin 

i: AM.w  \Y     \m  SES    LAID    BARE. 

'I  In  Railroad  is  a  Carrier,  not  a  Producer-  Discrimination  against  Certain 
Localities — Secret  Cipher-code  of  Private  Car  Lines  People  /'refer  Less 
Prosperity  to  Lost  of  Liberty 183 


l,;  CONTENTS. 

Page 
CHAPTER    XIV 

THE    WORLD'S    GREATEST    [NDUSTRY. 

Combined  Length  of  the  Railways  of  the  United  States  Amounts  to  About 
Two-fifths  of  the  Total  Mileage  of  the  World — Great  Advancement  in 
Railway  Construction,  Train  Equipment,  High  Speed  and  Safety  Devices 
— Railroad  Buiiding  I  In1  Foundation  of  Com  inn-rial  and  Industrial  Prog- 

ind  Prosperity 193 

CHAPTER  W 

JUGGLING  WITH  DOLLARS,  OR  HOW  SPECULATION  TS 

CARRIED  ON. 

Speculative  Fever  is  Inborn — Speculation  Means  to  Spy  Out — Before  the 
A  Ivent  of  Instantaneous  Communications  by  Telegraph  and  Telephone, 
Business  Carried  on  Between  Distant  Communities  was  Speculative — 
Modern  Speculation  is  Gambling  on  a  Basis  of  the  Element  of  Time  and 
is  Considered  Injurious  to  the  Murals  ami  Interests  of  the  Public — Barom- 
•  i,  r   of    Business 197 

CHAPTER   XV] 

DIFFERENCE    BETWEEN    SPECULATION    AND   [NVESTMENT. 

.1    Majority  of  the  American    People  are   Speculators — Invest   Their  Money 
Blindly  in   Securities — Do  not  Know  the  Difference  Between  Sarin;/  and 
ulation — Real   Estate  the  Real  Safe  Investment 311] 

CHAPTER   XVI] 

MORALITY    IN    WALL  STREET. 

i  Financiers  Are  Trustees  of  Wealth  for  Others — Abuses  of  Sacred  Trust 
culating  with  "Inside  Information" — Juggling  with   the  People's  Sav- 
ings- -Great   Power  ( 'rentes   a  real   Obligations 227 

CHAPTER   XVII] 

LYING     TO     MAKE     MONEY— HOW     WALL     STREET     THRIVES     OX 

IALSK   RUMORS. 

"Fake"   Quotations — Gambling   on    Ram   or  Sunshine — Government  Weather 
rts  Eagerly  Sought  and  Often   Perverted — How  Fortunes  are  Made 

and   Lost   on    l!  a  mors  and  Canards 232 


CONTENTS.  17 

Page 
CHAPTEE   XIX 

WHAT'S   WHAT    IX    BUSINESS. 

.1  New  Business  Dictionary — The  "Lingo"of  Wall  street — A  Comprehensive 
Explanation  of  All  Technical  Words  and  I'll  rases  Used  in  the  World  of 
Finance  and  Speculation 239 

CHAPTEE  XX 

THE    SENATE   OF   AMERICAN    FINANCE. 

The  Directory  of  Directors — Extreme  Concentration  of  Corporate  Organiza- 
tions— Ninety  Men  Control  the  Purse  Strings  of  the  Country — Fifty-seven 
Members  of  the  Money  Semite — Abuses  in  the  Directory  System 255 

CHAPTEE   XXI 

THE    BIRTH    OF   THE   TRUST. 

How  Great  Combinations  of  Capital  Have  Multiplied — The  Harvest  Time  of 
the  Promoter  and  the  Muni/minim- — Dummy  Directors  and  Trust  Nur- 
series— The  Nation  Becoming  .  I  roused  to  the  Fuels -ji,", 

CHAPTER  XXII 

"GOLD    BRICKS"— FRAUD    UNDER    THE    GUISE    OF    SPECULATION. 

Bunco  Humes  in  the  World  of  Finance— Traps  Hulled  with  Promises  of  Big 
Dividends — Typical  "Get-Rich-Quick"  Schemes — Fake  Banks  and  Fake 
Credit  Agencies  and  References — The  Work  of  the  Bucket  Shu/* — The 
Rule   for   Safety 27] 

CHAPTEE   XXIII 

THE      STEEL      TRUST— WONDERS      OF     THE      INDUSTRIAL      AGE. 

Sufficient  Natural  Resources  in  the  Earth  to  Promote  the  Happiness  and  Pros- 
perity of  all  Mankind  The  Universal  Demand  For  and  Use  of  Iron  Ore — 
Minnesota,  with  Ranges  Opened  as  Lute  us  1892,  Supplies  More  Ore  Than 
Any  other  Section  of  the  World— How  it  is  Converted  for  Use  in  the 
.  I  rU  and   Trades 

<  II  U'TKi;  XXIV 
THE  COPPEB  TRUSI 
Copper  Tin  Most  Valued  of  All  Minerals  Its  Use  as  a  Base  in  Supplying 
Fie,  ten  Power  Ancient  Races  of  People  Used  Copper  in  the  Manufacture 
of  Weapons  and  Pottery  The  Tempering  of  It  Considered  u  Lost  Art — 
Mines  Nearly  Five  Thousand  Feet  Deep  Ladder-ways  into  the  Bowels  of 
the  Furl l,  a  Mile  Long 287 


18  CONTENTS. 

Page 
CHAPTER   XXV 

SOME  OTHER   BIG   TRUSTS. 

Toba  M  ger — Whisky  Trust — Peoria  County,  Illinois,  Pays  One-fifteenth 
of  All  the  Government  Expenses  in  Internal  Revenue  Tax — Some  Trusts 
That  Went  Wrong— The  Ship-building  Hubble— Men  Who  Fail—Why 
M.  n  Tail— Coal  Mining 897 

CHAPTEE  XXVI 
THE  HARVESTER  TRUST. 

.1//  Estimated  Pro/it  of  Forty  Million  a  Year— Save  the  Wheat  Fields — 
Wealth  of  Agriculture — Improvements  in  the  Implements  of  the  Fanner — 
Imiin  nse  Hay  and  <  'orn  ( 'rops 319 

CHAPTEE   XXVII 
THE  RISE  OF  A  GREAT  NATION. 

Marvelous  Growth  of  this  Country  of  Ours  Since  the  Close  of  the  Civil  War — 
Population  Increased  from  33,000,000  to  83,000,000  Soul's— Wealth 
Increased  nearly  Six-fold — Thousands  of  Miles  of  Railway  Built — World's 
<  'niton   Monopoly,   Etc 331 

CHAPTEE  XXVIII 
MONEY. 

Chinese  the  First  to  Coin  Money— Source  of  Paper  Money — The  Modern 
Bank-Not e  Regarded  as  a  Swedish  Invention 340 

CHAPTEE  XXIX 

THE   GOLD   SHIP— HOW   A    NATION    PAYS   ITS   DEBTS  TO   FOREIGN 

COUNTRIES. 

Not  Enough  Actual  Money  in  the  World  t<>  Conduct  its  Business  on  a' Cash 
Basis    for   a  Single  Day — How  the  Exchange  of    Com  modules    Equalizes 
rvthing — Explanation  of  "Balance  of  Trade"  and  Foreign  Exchange.  .   345 

CHAPTEE  XXX. 
TOIL  VERSUS  LUXURY. 

Millions  Wasted  by  the  Rich  in  Shameful  Extravagance,  while  Children  of  the 
Poor  Work  for  Nine  Cents  a  Day — .1  Fifteen  Million  hollar  House — Evils 
of  the  Sweating  System  in  Large  cities 351 


CONTENTS.  19 

Page 
CHAPTER  XXXI 

MUSCLE  AGAIXST  MONEY. 

Where  the  "Square  Deal"  Doctrine  Should  Rule  at  All  Times — Growth  of 
Organization  in  the  Industrial  World — Labor  Legislation — Child  Labor 
and  the  Lair — The  War  Between  ( 'a [dial  and  Labor 359 

CHAPTER  XXXI L 

WEAPONS  OF  THE  LABOR  TRUST— Till:  STRIKE  AND  BOYCOTT. 

The  Arms  and  Am  munition  of  the  Conflict — Skilled  versus  Unskilled  Labor — 
Some  II is/uric  Strikes  and  Their  Attendant  Disorders — Methods  of  Attack 
and   Defense 3ti9 

CHAPTER  XXXII] 

THE  CRIMES  OF  LABOR STRIKE  VIOLENCE  AND  ITS  CAUSE. 

The  Rights  of  the  Individual — Union  and  Non-Union  Laborers — The  Suffer- 
in;/  Public  Between  Two  Fires — The  "Picket"  and  the  "Scab" — Epochs  in 
the  Long  War — "Bleeding  Colorado" — The  "Grafting"  Labor  Boss — 
Bribe  and  Blackmail — Who  Is  Responsible  for  the  Disorders  that  Accom- 
pany Strikes  f 379 

CHAPTER  XXXIV 

CAPITAI/S    ANSWER    TO    LABOR— NO    "SQUARE    DEAL"    FOR.    THE 

PUBLIC. 

How  Employers'  Organizations  Have  Multiplied — Radicals  and  Conservatives 
Here  as  Well  as  A  mum/  Labor  Unions — The  Lockout,  the  Blacklist  and 

the   In  jaw  tarn   Ansae,-   lite   Strike   ami   the    Boycott 385 

I  EAPTEB    WW 

SOCIALISM. 

.1  Theory  of  the  Industrial  Millennium  and  the  Tendencies  vn  that  Direction 
us  Hastened  by  the  Abuse  of  Monopoly  in  both  Capital  ami  Labor  Classes 
— The  Municipal  Ownership  Movement  an  Evidence  of  the  Growth  of 
Socialist    l'n  m  iples 390 

CHAPTEB  WW  I 

GRAFT  l\   AMERICAN   <  [TIES. 

The  Plundering  of  the  Private  Citizen— Public  Conscience  Aroused  Phila- 
delphia Corrupt  but  no  Longer  Contented    Signs  of  Hope  for  the  Future.  391 


SO  CONTENTS. 

Page 
CHAPTER  XXXVII 

THE  GRAFTER  IN  BUSINESS. 

Private  and  Public  draft  Work  in  Close  Partnership — Business  Men  as  Bood- 
§     Juggling   With    Life  and  Safety — The   Labor  Boss  and  the  Capital 
Boss     Strikes    ami    Strike    Settlements    for     Sale — Higher     Standards 
ed W5 

CHAPTER  XXXVIIT 

WHAT  ARE  YOU  GOING  TO  DO  ABOUT  IT? 

Plutocratic  Impudence — Education  Mast  be  the  Foundation  to  the  Solution 
of  Present  Day  Evils — Broadening  of  Governmental  Power — Publicity  the 
,,,-    draft — The    Same    Brand    of    Honesty    for    PuVlic   as 
fur  Private  Life. 411 


LIST   OF   ILLUSTRATIONS 


PAGE 

Greed  and  Labor Frontispiece 

Progress  and  Science 12 

Abraham    Lincoln 32 

Theodore  Roosevelt 32 

Haymakkkt    Square '■'>'> 

Tin:    Trust    Company    of    New 

Jersey    Building . . . .  40 

Where  the  Directors  of  the 
United  States  Steel  Corpor- 
ation   Meet 43 

The  "Searchlight"  p.v  Roent- 
gen   -X"    Kays 47 

Jacob   II.   Schlep 48 

Charles  S.   Fairchild is 

.1  mi  i:s    K.    Kllni: -18 

Col.  John  Jacob  Astob 48 

William    Rockefeller !'.• 

Henri    II.   Rogers 19 

.1  mils    Stili.m  \n 49 

George  W.    Perkins r.» 

First  National  Bank   Building, 

( Hi'  \(,(.    5t 

Some  of  the  Trusts 60 

United  States   Mini.   Philadel- 

imii  \ G4 

Lnteriob   View,  Chicago  Clear- 

[ng    House   G7 

\     Great     Banking 

Hous] 69 

II  \i  ling  I ngots  <n  Silver  Bul- 
lion   in    the    Phil  mm  lph  i  1 

Mint    73 

Commodore    <  Iornelius    V  lndi  l- 

bilt ;i; 

Willi  \\i   W  ^ldori     Vstor 76 

Willi  \m    K.    V  lnderbilt 76 

Bi  B8i  1.1,    Sage    76 

James  II.   Htdi 82 

Jami  b  W.  Alex  lnder 82 

G]  ORG!    •'.   (  Iould 82 

John   A.   McCali 82 

\'i  w   York  '">k i  Sob  ipi  rs" !•  I 

THOM  18    W.    LaWSON 111 

Rev.   Dr.  Washington  Gladden.  11 1 

Si  i  rii  in   Gib  lrd   1 1 1 


page 

Andrew    Carnegie 111 

.John    Davison    Rockefeller L22 

University,  of  Chicago 124 

University  of  Chicago....:....   L25 

Filling  an  Oil  Tank L28 

Oil  Well  Gushes L28 

Baku  oil  Fields 132 

Kansas    Legislature   L36 

New  Style  of  Grain   Elevator..  L49 

Chic  lgo's    Financi  \i.   <  Ienter.  .  .  L50 

Residence  of  J.  Ogden  Armour..  L52 

Cattle  on  the  Range 154 

I  teESSiNG  Beef   L56 

.Main      Entrance     to     Chicago 

Union    Stock    Yards L58 

Making    Music   Strings 160 

A    Refrigeb  ltob   Cab 1>>I 

( '  lttle    Pens    L65 

Gre  \t   Railw  11    Freight  Y  lrds.  L6"3 

Michigan   Avenue,  ( !hic igo ill 

The  Stables  of  a  Millionaire..  L75 
A   Banquet  to   Pbesident  Roose- 
velt   l  ji 

Knw  \i;i>  II.   II  lrriman 182 

J  a  -Mi:s    J.    Hill 182 

\\  1  i.i.i a m   II.  Moore 182 

A.  J.   C  *ss  \  1  1 L82 

Grain     Elevator     on     Chicago 

Riveb isi 

Olisi.LV  V.TION    ('  LB     1*1.  \  1  mini 194 

Ki.lv  Mm  Loop,  Chic  lgo 19S 

J.    <  Igden    Armoub L98 

Charles   M.   Schwab L98 

J  Mil  B     A.     I'\  Tl  IN 1!IS 

John    W.  G  ites L98 

'I'n  i    Blaob  bo  \i;h    \\i>  Ticker  . . .   202 

Trading   'Tits,"  Chicago   Board 
of  Tb  lde   209 

Sr\  I  I      Si  i;i  ET,    <  'II  If  \c<» 216 

rIA  pic  \l    Bi  btn  ess    <  Iffioe    of    \ 

LaRG I     <  fORPOB  ITION    220 

Sil'.M  \l;|\|         (  '  \LI  I     M  \KI\f        M  \- 
f  ill  Nil:  \       

The  Gbe \t  I  >  mi    it  Assi  \\ 


LIST  OF  ILLUSTRATIONS. 


PAGE 

James  B.   Forg  \\ 238 

M  \i;sh  \i.i.    Field 238 

Paul    Morton 238 

,lo\is    M.    II  \i.i 238 

LiARGESl       KM  CAIL     STORE     IN      THE 

World 253 

Baron    Rothschild 254 

Lord  Nathan   Rothschild 254 

III  NK\      0.      H  Wl   MI.1  IK 254 

Claus    Sprj  ckles 254 

The  W  lldorf  Astori  \   Hotel.  .  .   262 

James    B.    Dili 262 

Charles  T.   Yerkes 262 

[llinois   Theateb 264 

Pennst  ev  \m  \    Steel    Mm 268 

Where     Nature     Supplies     the 

Power 27"3 

[international     Convention    of 

Civil    Engineers 278 

J.   Pierpont   Morgan 280 

A   Lake    Superiob    Region    [ron 

Mini: 283 

Mount   [ron   Mini:.  Minnesota..   285 

F.    An. i  -n  B    Hi.iNzi; 381 

No.  2    l'n    Adams   Mini:.  Minne- 
sota    293 

A    Remarkable    Salt    Field    in 

Southern    Californ]  \ 295 

The    Largest    Lumbeb    Yard    in 

the    World 296 

Vault     Stored     with     Tobacco 

*  ompant    Bonds 297 

Clerks  at  Work  ontheTobacco 

Merger 298 

Transporting  Coal  on  the  Ohio 

Rtveb 310 

Trolley     I»<  omoi  m:     in     (  Ioal 

Mine 311 

Electric  Coal  Cutter 312 

Electric    Drill   at   Wore    in   a 

Mini: 313 

line  Locomotives  in  a  Coal 

Mini: 314 

A   Vr.w  Way  or  LOADING  Cos],  on 

I       B 315 

Entrance  to  Chk  uso  River....  316 
[nterioe     View    of     a     Marble 

Quarry 317 


RAGE 

Where  the  Mowers  ^ndKeapers 

Are    Make 318 

The     M  an  u  facte  ke    of     Bindeb 

Twine 320 

A   Model  Wheat  Farm 322 

A   Garden  Truck   Farm 325 

The  Culture  of  Onions 328 

Castle     Garden     and     Batteri 

Park 330 

Cotton  Ready  for  Shipping....   334 
Gold  Prospecting  in  the  Yukon 

Coi  nti^ .   336 

Store  in  a  Gold  Mine 337 

[nterior    of    a    Gold    Stamping 

Mill 339 

Early  Chinese  Money 340 

Chinese  Knife  Money :'■  1 1 

Tribute   Money 341 

Chinese   Money    (Blade    Short- 

ened) 342 

Chinese    Cash 342 

The  "Widow's   Mite" 343 

Exchequer    Tally 343 

A   Great   Steamer 34  1 

The   World's   Largest  Camera..   351 
Photographing  prom  a  Tower..   352 

Sorting  Sheep  Skins 356 

Sham  Traction   Engine   Plow..   357 

Carroll  D.  Wright : 358 

John    Mitchell 358 

Frank   P.  Sargent 358 

Samuel    Gompers 358 

Interioh  View  of  a  Modern  Ma- 
chine    Shop 361 

"Breaker  Boys" 36*3 

Beef   Dressing  Room 368 

Wash    Day   in  Tenement   House 

District    270 

Tailob    Shoe 31  1 

Making  Locomotive  Springs....   372 
Window    Glass   Makers   at   the 

Melting    Furnaces 374 

A  Cable   Engine 375 

Glass   Bottle   Blowebs 377 

Typesetting    Machines    \ni>  Dp- 

l.l:  \toi;s     o7o 

The    Poob   Quarter,    New    Yore 

City     384 

Excavating  a   Tunnel 388 


INTRODUCTION 


INDEPENDENCE  OK  INTERDEPENDENCE 

Mi:  \sikkd  In  the  age  of  the  records  of  mankind  on  earth,  the  length  of  a  single 
generation,  or  even  a  single  century,  is  but  a  short  span.  But  there  are  single 
lives  that  are  privileged  to  see  greater  events  and  greater  progress  than  art- 
recorded  in  a  dozen  centuries  in  the  dark  ages  of  the  past.  There  is  a  tendency 
among  all  men,  as  there  has  been  for  many  a  day,  to  look  back  on  the  "good  old 
times"  and  wish  for  a  share  in  life  as  it  used  to  be.  No  doubt  the  student  of  the 
Thirtieth  Century  will  look  back  upon  the  romance  that  is  dead,  just  as  we 
are  prone  to  look  back  on  the  picturesque  events  of  colonial  days,  and  the  develop- 
ment of  the  civilization  of  Greece  and  Koine  with  a  feeling  that  we  lost  much 
by  not  living  when  such  significant  things  were  happening. 

lint  if  we  look  at  thf  situation  judicially,  we  are  forced  to  the  conclusion  that 
never  in  all  history  wen-  greater  movements  under  way  than  those  of  the  imme- 
diate present.  It  seems  probable  that  the  Twentieth  Century  is  to  go  down  in 
history  as  one  in  which  the  most  vital  of  human  relations  were  determined  and 
readjusted,  the  mosl  important  controversies  of  the  classes  and  the  masses  settled, 
the  rule  of  the  special  privilege  brought  to  an  end.  and  the  recognition  of  the 
ethical  righteousness  of  the  "square  deal"  for  every  man,  impregnably  fixed  in 
national  policies  and  in  the  individual  conscience. 

The  man  who  lives  today  cannot  say  with  the  dreamer,  "The  age  of  romance 
i-  dead."  Instead,  he  should  realize  that  he  is  in  the  midst  of  the  most  dramatic 
period  in  history  the  period  in  which  human  rights  are  to  be  defined  and  pre- 
served as  they  have  never  been  before.  The  man  who  shares  the  activities  of 
today,  in  station  however  humble,  is  a  participant  in  the  significanl  movements 

that    .in-    \isib|r    to   every    thinker.      Tidal    waves   may    wreak    havoc   upon   a   com 

niunity,  and  be  remembered  for  the  disaster  they  have  wrought.  They  are  but 
local,  even  whin  greatest.  Tin  real  work  is  done  by  the  tide  itself,  which  is 
universal  over  every  sea,  and  though  less  spectacular  than  the  cataclysmic  storm. 

is   irresistible,  silent   and  constant.      Perhaps  we  do  not   all   notice  the  tide,  but   we 

living  .it  ,i  time  when  it  1>  approaching  its  maximum,  and  it  will  be  well  to 
oli  erv<    its  progress  and  its  probable  effects. 


%A  INTRODUi  TION. 

The  tide  has  different  manifestations  which  can  be  noted  and  defined  with 
Perhaps  the  most  conspicuous  of  these  is  the  growing  appreciation  of  the 
fac|  thai  in  civilization  as  it  is  today,  there  is  no  such  thing  possible  as  inde- 
pendence, luit  only  interdependence.  He  who  wants  to  be  independent  in  the 
extreme  sense  of  the  word,  must  seek  isolation,  depend  upon  the  chase  and  his 
own  garden  for  food,  upon  his  own  weaving  for  garments,  and  upon  his  own 
building  for  shelter.  If  one  lives  amid  human  society  he  cannot  be  independent. 
Neither  can  a  nation  today  be  independent  of  the  rest  of  the  world.  China, 
Japan  and  Korea  in  turn  have  been  forced  to  absolute  abandonment  of  their 
historic  policies  of  seclusion,  and  even  Tibet  has  seen  its  walls  breached  within 
the  last  year,  by  the  entrance  of  a  British  expedition  and  the  forcing  of  a  treaty 
prohibiting  the  exchange  of  trade  and  travel. 

Tlu'  complexities  of  civilization  increase  in  exact  ratio  with  the  increase  of 
comfort,  and  this  is  readily  demonstrated  by  even  the  most  superficial  glance  at 
the  progress  of  the  world.  From  the  era  of  the  cave  and  cliff  dweller,  of  stone 
hatchet  and  bronze  hammer,  we  have  come  to  a  time  when  we  shelter  and  feed  and 
clothe  anil  educate  ourselves  in  a  manner  that  makes  our  ancestors  seem  like 
savage  beasts  rather  than  men.  The  farmer  or  the  mechanic  of  today  commands 
more  genuine  comfort,  convenience,  and  even  luxury  in  his  household,  than  could 
be  found  in  a  royal  palace  two  hundred  years  ago. 

This  change  has  come  simultaneously  with  the  growth  of  interdependence 
as  against  independence,  and  perhaps  because  of  this  growth.  The  robber  baron 
of  the  Middle  Ages  was  almost  independent,  although  even  he  had  to  depend 
for  his  food  and  his  fighting-men  upon  the  peasants  over  whom  he  lorded  it.  The 
robber  baron  of  today,  if  we  admit  for  a  moment  that  such  may  still  be  found, 
is  far  less  independent  than  was  his  progenitor.  The  latter,  if  necessary,'  prob- 
ably could  have  gone  out  in  single  combat  and  fought  for  himself  with  admirable 
strength  and  skill.  He  of  the  Twentieth  Century  might  earn  his  own  living  by 
digging  coal  from  the  mine,  or  pumping  petroleum  from  the  earth,  or  bartering 
the  product  of  his  loom  to  a  waiting  merchant,  if  all  his  retainers,  high  and  low, 
were  to  withdraw  from  his  service.  Hut  certain  it  is,  he  would  not  be  a  magnate, 
but  only  a  man,  if  such  a  condition  should  arise. 

The  magnate,  indeed,  is  as  truly  a  dependent  as  is  the  humblest  of  those  in 
hi-  organization,  his  only  advantage  being,  perhaps,  a  keener  perception  of  con- 
ditions in  the  field,  and  a  larger  supply  of  ammunition  and  provisions  for  sus- 
tenance  in  the  event  of  hostilities.  It  would  be  a  shallow  observer  indeed  who 
could  not  discover  the  interdependence  between  these  elements  and  every  other 
dement  in  our  civilization,  local,  national  and  international,  if  the  parallel  be 
pursued  to  its  logical  conclusion. 


INTRODUCTION.  25 

A  few  paragraphs  which  will  summarize  the  growth  of  civilization  to  its 
present  form  will  be  pertinent  in  introducing  the  broad  subject  concerning  which 
tbis  work  treats.  In  the  childhood  of  the  race,  individualism  was  the  only  social 
system.  Each  man  demanded  for  himself  food,  shelter  and  safety,  and  for  these 
he  strove  individually  at  whatever  cost  to  bis  neighbors.  Soon  be  discovered  that 
these  necessities  were  better  provided  by  joining  with  Ins  neighbors  than  by 
fighting  with  them,  and  tbis  was  the  nucleus  of  the  social  system  which  we  have 
attained   today. 

Say-  a  recent  writer:  "The  conspicuous  tendency  ruling  today,  is  the  con- 
solidation of  enormous  commercial,  industrial  and  financial  powers,  into  what  we 
characterize  a-  'Monopolies,'  'Syndicates'  and  'Trusts.'  lint  even  the  Trust 
itself,  in  its  most  extreme  form,  is  but  a  natural  outgrowth  of  conditions  Long 
developing.  There  is  no  essentia]  difference  in  principle  between  the  great 
department  store  of  the  metropolis,  and  the  general  store  of  the  country  cross 
roads.  Size  is  the  only  vital  distinction.  The  village  banker  embodies  all  the 
characteristics  of  the  moneyed  captain  of  Wall  Street,  except  that  of  magnitude. 
Tin  owner  of  the  transfer  line,  which  carries  passengers  and  their  baggage  from 
railroad  to  hotel,  is  a  transportation  magnate  on  a  smaller  scale.  Any  man  who 
has  goods  which  another  wants,  and  holds  up  the  price  therefor  to  the  limit  of  bis 
customer's  ability  and  willingness  to  pay,  is  illustrating  the  principle-  of  mo- 
nopoly. Broadly  speaking,  any  form  of  organization  which  economizes  labor  and 
produces  a  given  result  with  the  least  demands  upon  man  and  material  is  good. 
The  surplus  thus  released  becomes  available  for  other  service,  and  the  genera] 
tendency  is  toward  a  broadening  of  industry  and  opportunity.  Tins  is  not  less 
true  because  in  many  instances  the  process  of  readjustment  is  a  painful  one, 
bringing  hardship  to  individuals  or  classes.  Nor  is  it  controverted  by  the  fact 
that  monopolies  and  their  kin  are  sometimes  oppressive,  claiming  for  themselves 
all  tb«'  benefits  of  economized  labor  and  material  that  should  accrue  to  the  public 
they  aervi ."' 

The  pubhc  at  large  perhaps  does  not  understand  the  ruling  policy  which 
governs  those  who  are  operating  great  financial,  industrial  and  commercial  under- 
takings. It  will  be  edifying  to  glance  at  the  viewpoint  of  the  men  who  control 
the  trust-  that  are  reckoned  as  almost  impregnable  in  the  volume  of  trade  in 
this  country.    "Business  is  competition,'"  they  declare.    Competition  means  strife 

to  e\ce|,  and  strife  means  the  survival  of  the  fittest,  not  from  a  personal,  moral 
ot  ethical  point  of  view,  but  economically  speaking,  and  meaning  bv  "fittest" 
the  man  who  rises  to  the  top.  Thus  "Business  is  war**  becomes  the  watchword 
<»l    the  captain  of  industry.     But   there  an'  laws  of  w  1 1    generally   recognized, 


INTRODUCTION. 

and  so  there  are  rules  l>\  which  the  uars  of  business  are  regulated.  And  just  as 
in  war  there  Is  a  cry  for  humanity  which  the  civilized  nations  are  heeding  and 
are  writing  into  international  law.  so  is  there  a  cry  for  a  moral  outlook  upon  the 
business  field  a  cry  for  the  "square  deal,"  which  is  rising  in  volume  and  is 
being  heard.  This  is  the  cry  which  promises  to  force  itself  upon  the  recognition 
of  even  the  most  heedless  in  the  war,  by  Legislation  if  all  other  means  fail. 

"Big  money"  is  the  principal  weapon  in  the  hand  of  the  circle  of  men  who 
have  now  come  to  the  conclusion  that  it  is  unwise  to  right  each  other  within  their 
own  circle.  Now  that  combinations  to  restrain  trade  and  to  control  competition 
are  meeting  concerted  resistance  from  the  weaker  men,  this  weapon  meets  the 
voting  [tower  by  influence  and  bribery.  As  soon  as  this  condition  is  realized  by 
tin  public,  a  more  strenuous  struggle  begins  for  what  the  injured  multitude 
concci\t  to  be  fair,  and  of  equal  advantage  for  all.  At  last  obloquy  falls  upon 
the  man  who  buys  special  privilege  and  advantage  by  the  lavish  use  of  his 
accumulated  wealth,  and  the  public,  not  understanding  the  conception  of  busi- 
ness  which,  generally  speaking,  obtains  among  the  capitalist  class,  marvels  at 
the  versatility  of  the  multi-millionaire  who  may  teach  a  Sunday-school  class, 
support  the  cause  of  education,  and  give  large  sums  to  missionary  undertakings, 
while  at  the  same  time  he  is  credited  with  the  use  of  methods  which  ruin  com- 
petitors, corrupt  legislatures,  establish  industrial  injustice,  and  stimulate  the 
grow  th   of  cla^s   hatred. 

Astonishing  as  it  may  seem  to  one  reared  in  another  school  of  thought,  the 
simple  explanation  i>  that  such  men  absolutely  disassociate  their  personal  life 
and  habit-  from  their  business  life  and  habits.  Apparently  they  put  on  a  new 
code  of  ethics  and  morals  when  they  change  their  street  coat  for  their  office  coat, 
and  -it  at  the  desk  to  consider  the  plan  of  the  day's  campaign.  It  is  probably 
true  that  the  rising  cvy  for  the  "square  deal"  in  business  and  industry,  to  all 
men  and  from  all  men,  has  caused  genuine  surprise  and  perplexity  in  a  great 
number  of  those  against  whom  the  cry  is  directed,  and  who  have  considered  them- 
selves playing  the  game  of  business  as  they  would  play  the  game  of  war,  with 
the  ruthless  intention  to  win  at  any  cost  to  the  vanquished,  and  with  no  realiza- 
tion that  any  other  code  obtained  anywhere. 

Today  a  demand  is  abroad  throughout  the  land  for  the  abolition  of  the  most 
glaring  wrong-  in  tin-  body  economic.  Long  since  has  the  suffering  public, 
ground  between  the  upper  and  nether  stones,  felt  that  conditions  must  be  so 
changed  a-  to  avert  tin  constant  succession  of  ruinous  and  bloody  strikes.  It  has 
»<n  with  shame  the  hardihood  with  which  aggregations  of  capital  are  permit  ted 
to  ignore  the  law  and  subvert  justice  by  bribing  legislators,  to  frame  statutes 


INTRODUCTION.  9Tt 

favorable  to  the  moneyed  interests  and  against  the  best  policies  of  the  state.  On 
the  other  side,  it  has  seen  the  dishonest  legislator  in  his  ruthless  "holdup"  of 
honest  corporations  bent  upon  legitimately  securing  proper  legislation.  Monopoly 
has  grown  to  such  an  extent  that  it  has  stimulated  students  to  find  solution 
in  the  ertremest  application  of  radical  economic  systems.  In  the  folly  and 
wickedness  of  predatory  monopolies,  the  socialist  finds  his  most  impressive  argu- 
ments for  a  paternal  control  of  the  tools  and  materials  from  which  wealth  is 
produced,  so  that  the  profits  and  benefits  may  accrue  to  the  producers  and  the 
public,  rather  than  to  the  private  interests  that  exploit  public  necessity  for  their 
own  profit. 

The  whole  question  is  many  sided.  From  the  writer  already  quoted  we  offer 
another  paragraph,  which  suggests  some  of  the  ramifications  into  which  the 
inquiry  leads:  "It  is  beyond  question,"  he  says,  "that  the  telegraph  service  of 
the  country  is  more  adequate  and  efficient,  to  the  advantage  of  every  patron, 
consolidated  as  it  is.  than  if  it  were  scattered  among  a  score  or  a  hundred  small 
companies,  each  confined  to  a  district,  or  all  competing  for  trade  in  every  com- 
munity. And  vet  it  may  he  retorted  with  some  reason  that  it  is  just  as  truly  an 
extravagance  of  labor  and  equipment  for  three  milk  wagons  to  traverse  a  given 
neighborhood  at  the  same  time  every  day,  each  serving  one-third  of  the  house- 
holders, when  one  could  do  it  just  as  well,  thus  leaving  the1  surplus  men,  wagons 
and  horses  to  some  employment  actually  productive. 

"If  closely  parallel  lines  of  railways,  each  requiring  to  earn  interest  and 
profits,  are  .hi  improper  drain  on  the  country  they  traverse,  where  one  would 
-<  rve  -ill  purposes  equally  well,  in  less  degree  the  same  is  true  of  parallel  routes 
for  the  milk  wagons.  Inventions  have  had  to  face  opposition  throughout  the 
whole  historj  of  the  world,  even  until  today.  The  self  binding  reaper  was  one 
of  tin   triumphs  of  modern  invention  in  the  mechanical  field,  hut  it  was  riotously 

tiled  as  revolutionar}  and  disastrous  to  industry  by  mobs  of  agricultural 
laborers  who  saw  their  occupation  vanishing.  Yet  the  broad  prairies  of  the 
Mississippi  valley  have  been  brought  under  cultivation,  and  homes  and  employ 
men!  have  been  created  for  millions  by  the  improvement  in  agricultural  machinery. 
Tin  typesetting  machine  was  opposed  because  one  would  do  the  work  of  several 
hand  compositors  .Mid  many  nun  would  he  discharged.  \\u\  newspapers  have 
multiplied  and  enlarged  by  it -.  introduction  and  the  whole  craft  was  ultimately 
benefited  thereby.     Let    the    reader   meditate   on    these   conditions,    llniN   briefly 

gested,  and  reason  out   for  himself  the  lessons  of  the  fundamental  principles 

in\o|\  id." 

It  is  not  alone  in  financial  and  commercial  undertakings  that  the  demand  for 


INTRODUCTION, 

the  "square  deal"  is  making  itself  heard.  Apparently  there  is  a  growing  neces- 
sity <>t'  absolute  honesty  in  the  political  and  the  industrial  field  as  well.  The 
newspaper  and  magazine  press  have  done  noble  work  in  the  ferreting  out  of 
injustice  and  dishonesty  in  high  places,  and  in  creating  in  the  public  mind  a 
proper  indignation  against  those  who  have  betrayed  their  trust. 

Such  investigators  as  Miss  Ida  Tarbell,  Lincoln  Steffens,  Hay  Stannard 
Baker,  and  others  who  might  be  named  in  the  same  list,  have  found  in  the  Federal 
Government,  in  State  Legislatures,  and  in  Municipal  Councils,  the  details  of  dis- 
honesty and  corruption  that  were  but  imagined  or  charged  at  random  before 
they  did  their  work.  Organized  capital,  organized  labor,  and  organized  politics, 
alike,  have  been  discovered  to  be  tainted  with  rottenness,  vice,  bribery,  corruption 
and  avarice.  Revelations  have  been  made  to  the  world  that  would  have  fallen 
on  dull  ears  only  a  few  years  ago,  so  little  prepared  were  the  people  to  hear 
them. 

In  a  large  degree  partisanship  has  been  eliminated  from  these  exposures.  It 
i>  coming  to  be  realized  that  there  is  little  of  political  principles  and  economic 
policies  troubling  the  professional  politician ;  and  with  that  realization,  honest 
voters  are  caring  less  for  the  political  label  worn  by  a  candidate  or  an  office 
holder,  in  comparison  with  what  they  discover  of  his  honesty  or  dishonesty.  It 
i>  becoming  largely  a  matter  of  indifference  to  the  thoughtful,  whether  a  Roose- 
velt, a  Folk,  a  Deneen  or  a  La  Follette  supports  one  school  of  political  economy 
or  another,  when  discovered  to  be  standing  with  the  people  and  demanding  a 
"square  deal*'  for  every  man. 

The  result  of  all  this  has  been  a  wide-spread  demand  for  a  correction  of 
abust  5,  tni  a  termination  of  the  rule  of  "graft,"  and  for  a  more  intimate  knowl- 
edge of  both  -ides  of  the  controversy  in  which  the  questions  of  trust,  monopolies, 
special  privilege,  government  supervision,  government  ownership,  and  all  of  the 
things  growing  out  of  these  are  paramount.  The  public  has  welcomed  with 
voracity  the  detailed  facts  developed  by  such  investigations  as  that  of  the  so- 
called  Beef  Trust,  the  dissolution  of  the  Northern  Securities  Company  under  the 
Anti-Trust  law.  the  intervention  of  the  President  in  the  great  anthracite  coal 
-trike  in  1901-2,  the  unearthing  of  bribery  in  the  departments  of  the  National 
administration,  and  the  endeavors  of  the  President  to  check  discrimination  in 
railway  rates,  and  to  control  by  federal  legislation  all  corporations  doing  an 
state  business. 

At  the  same  time  those  magazines  which  have  published  definitive  articles  on 
the  inside  history  of  Standard  Oil,  the  Beef  Trust,  the  Railway  Merger,  the 
Life  Insurance  Group,  the  Copper  Ring,  the  Theatrical  Trust,  and  a  host  of 


INTRODUCTION.  29 

others  that  might  be  named  in  the  same  category,  have  found  the  public  waiting 
eagerly  month  by  month  for  such  material. 

Ever  beyond  this  point,  it  is  manifestly  true  that  the  result  of  recent  elections 
in  several  American  cities,  noteworthily  Chicago,  indicates  a  rapid  drift  toward 
government  or  municipal  control  of  public  utilities,  a  fundamental  and  primary 
contention  in  the  programme  of  the  socialists. 

With  a  full  appreciation  of  the  magnitude  and  importance  of  the  task  which 
they  have  assumed,  the  authors  of  this  work  have  surveyed  the  entire  field  as  here 
outlined,  into  many  ramifications  not  suggested  in  this  introduction,  and  have 
believed  that  tin  production  of  such  a  work  would  be  of  distinct  service  to  a  large 
circle  of  inquirers  who  have  not  the  large  number  of  facts  at  their  command. 
They  have  realized  their  responsibility  to  the  public,  and  to  the  tremendous 
interests  which  they  discuss  in  the  following  pages  with  absolute  frankness.  They 
have  had  no  desire  to  cast  oblocjuy  upon  any  person  or  any  organization,  not  yet 
to  gloss  over  any  evils  which  they  have  been  able  to  discover.  The  simple  pur- 
pose has  been  to  relate  the  facts  as  they  are,  as  lucidly  and  as  interestingly  as 
they  were  able  to  do,  and  let  those  facts  speak  for  themselves.  In  other  words, 
the  authors  have  approached  their  task  not  as  advocates  for  or  against  any 
system  or  ■  conomjc  theory,  but  judicially,  and  as  recorders  of  things  as  they  are. 

They  have  appreciated  likewise  that  the  individual,  high  or  low,  is  entitled 
to  full  consideration  in  every  controversy  of  methods  and  policies.  They  have 
believed  that  their  obligation  is  just  as  great  to  the  humblest  individual  as  to  the 

itest  corporation  or  trust.  Under  no  other  circumstances  could  they  justify 
the  offering  of  a  work  which  purposes  to  expound  the  whole  subject  of  the 
"square  deal." 

Perhaps  there  has  been  too  much  attention  paid  to  the  man  of  large  business, 
and  too  little  to  the  one  of  small  business.  Indeed,  we  may  question  it'  the  word 
"business"  has  not  been  too  narrowly  applied.  Politicians  ami  economists  have 
sought  to  discover  whai  the  business  world  thinks  of  questions  at  issue,  more  than 
once,  when  they  limited  their  inquiry  to  the  man  who  dealt  in  money,  or  the  man 
who  sold   goods  over  a  counter.      In  truth,  every  man  who  earns  his  living  is  in 

business.  Whatever  you  do  that  brings  you  a  return  for  your  efforts  is  your 
business,  whether  it  he  a  profession,  a  handicraft,  or  the  occupation  of  the  mer- 
chant.     He  who  wields  the  tool  of  the  mechanic  is  as  truly  a  business  man  as  is 

the  millionaire  railway  president,  banker,  or  merchant  prince.  If  we  follow 
v.ih  Webster's  definition  of  the  word,  and  that    of    every    other    recognized 

Lexicographer,  we  will  not   make  the  common  mistake  of  calling  one  person  a   busi 
man   and  another  a   laborer.      The  school   child   who  cues   for  a  garden  bed 


90  INTRODUCTION. 

or  .1  fruit  tree,  or  gathers  the  eggs  from  the  hay  mow,  is  rendering  a  service, 
and  is  entitled  to  be  reckoned  as  a  factor  in  the  business  world. 

It  would  be  reckless  to  cuter  the  realm  of  prophecy,  bu1  at  least  one  may 
venture  to  interpret  some  of  the  signs  of  the  times.  \fter  a  careful  observation 
of  the  course  of  public  opinion  ami  Legislation,  it  seems  that  the  American  public 
niav  he  permitted  to  felicitate  itself  that  a  better  day  is  dawning.  No  Longer  do 
we  tolerate'  dishonesty  in  the  political,  industrial,  financial  and  commercial  world, 
merely  because  the  guilty  first  become  prosperous  and  then  give  grudgingly  a 
part  of  their  plunder  to  some  public  cause  in  the  effort  to  palliate  their  offense. 
No  longer  do  we  view  with  patience  the  oppression  of  the  many  by  the  powerful 
few.  No  longer  do  we  accept  as  intelligent  argument  the  answer  that  "there 
have  always  been  such  evils  in  the  world  and  there  always  will  be."  And  no 
longer  do  we  deny  our  own  responsibility,  washing  our  hands  of  the  matter  and 
Leaving  the  solution  to  others.  The  whole  mass  of  the  people  must  enter  into  the 
subject.  They  must  share  the  struggle  and  the  responsibility  for  what  follows. 
NO  man  can  shirk  his  part  in  the  work  of  readjustment.  That  the  facts  here 
assembled  may  contribute  in  some  degree  to  the  mass  of  information  necessary 
before  any  inquirer  can  arrive  at  well  founded  and  honest  conclusions,  is  the 
earnest  hope  of  THE  AUTHORS 


CHAPTER    1 

THE  CUV  FOR  THE  "SQUARE  DEAL." 

The  Awakening  of  the  People — "Publicity"  Demanded — Government  Investi- 
gations Lead  to  Government  Regulations — A  General  Movement  for  Fair 
Jji  cding  in  Business. 

"The  bquare  deal." — "a  rough  phrase  covering  the  noblest  sentiment  that  has 
stirred  American  polities  since  the  Emancipation  Proclamation." 

It  is  thus  that  an  eminent  writer  upon  large  political  issues,  William  Allen 
White,  characterizes  the  action  of  President  Theodore  Roosevelt,  who  used  this 
homely  yet  powerful  appeal  to  the  American  people  in  a  great  and  successful 
political  campaign  and  who,  taking  it  as  the  motto  for  his  administration  "led 
the  way  from  the  consideration  of  problems  that  concern  the  accumulation  of 
national  wealth  toward  problems  that  concern  its  equitable  distribution." 

"Led  the  way"  puts  the  matter  quite  significantly  before  us,  for  though 
to  the  ••Strenuous"'  President  is  due  the  credit  for  coining  the  phrase  that  means 
BO  much  in  tins  age  of  growing  monopolies,  when  problems  more  serious  than 
ever  before  confronted  the  business,  social  and  mora]  world,  there  had  been  a 
cry  for  a  "square  deal'*  heard  from  many  quarters.  It  was  for  the  President 
to  lead  the  wav.  What  he  has  accomplished  has  been  a  leap  toward  justice  for 
which  humanity  is  pleading;  what  may  he  accomplished  from  these  beginnings 
cannot  be  estimated.  Hut  this  much  seems  true:  The  twentieth  century  prob 
ably  will  go  down  into  history  as  the  age  when  emancipation  from  trust  misrule 
and  monopolistic  oppression  was  won  by  the  sturdy  light  of  the  people,  just 
as  the  close  of  the  eighteenth  century  saw  the  chains  of  foreign  oppression 
broken  and  the  nineteenth  century  saw  the  freedom  of  the  negro  slave. 

Ii  tras  not  a  mere  coincidence  that  led  to  this  movement  for  fair  dialing. 
I.,  I  us  glanci  -it  ;i  sliort  page  in  the  history  of  the  country,  dating  back  only 
;<>  190£,  <»r.  Bay,  to  about  the  time  when  Roosevelt  succeeded  the  murdered 
President  McKinlcy.  Two  great  acts  of  this  young  and  strenuous  man  stand 
out  iii  tlu  flash<  -  of  th.  business  searchlight  :  one  «.'i>  the  order  for  the  Depart 
mi  nt  of  Justice  to  investigate  the  legality  of  tin-  great  Railway  Merger  the 
Northern   Securities  companj      over  whose   formation   there  had  been  a   battle 


34  THE  CRY  FOR  THE  "SQUARE  DEAL" 

of  millions  of  dollars;  also  the  test  of  the  legality  of  the  action  of  the  meat 
packers  of  the  country  in  controlling  the  supply  of  meat;  the  other  was  the 
intervention  of  the  President  in  thai  great  anthracite  coal  strike  in  Pennsyl- 
vania which  had  lasted  nearly  a  year  unci  had  caused  untold  misery  and  loss 
of  wealth. 

Such  action  seemed  a  great  departure  from  the  usual  path  of  duty  of  the 
chief  executive.  The  Coal  Trust  stormed;  the  Railway  Trust  magnates  cried  out 
in  rage.  The  knives  of  the  rich  wire  sharpened  to  defeat  Roosevelt  when  he 
should  run  for  re-election.  What  was  the  result,  or  rather  results,  for  they 
came  s<>  fast  that  they  seemed  almost  myriads?  Let  us  state  briefly  some  of 
tiie  most  important : 

Election:      Roosevelt's   majority   of  2,523,000. 

Vote  for  Debs,  socialistic  candidate,  386,955,  a  remarkable  demon- 
stration of  discontent  with  existing  conditions. 

Railroads:  President  Roosevelt  recommended  that  the  Interstate  Com- 
merce commission  he  given  increased  powers  so  as  to  regulate  railroad 
rates. 

Bill  to  this  effect  passed  the  House  of  Representatives  with  only 
s<  \  >  ntecn  negative  votes. 

A  storm  of  protests  arose  from  railway'  interests,  which  caused  the 
Senate  to  postpone  action  in  order  to  investigate  before  passing  a  law. 

Sharp  criticism  by  leading  citizens  and  the  press  of  the  action  of 
the  Senate,  with  charges  that  tin  Senators  were  controlled  or  unduly 
influenced  by  railroad  Interests. 

Anti-rebate  law  passed  in  Wisconsin.  Railroads  retaliate  by  stop- 
ping  further  railway   improvements   in   the  state. 

Presidents  of  railways  admit  pernicious  custom  of  allowing  rebates. 

Interstate  Commerce  Commission  finds  Beef  Trust,  has  monopoly  of 
private  car  lines.  Secret  codes  discovered,  indicating  illegal  rebates 
and    overcharge^. 

Armour  car  lines  succumb  to  pressure  and  reduce  exorbitant  icing 
charges  on   fruit   shipments. 

Complaints  from  merchants  in  small  towns  and  cities  that  railways 
have  wrecked  small  business  centers  in  order  to  build  up  the  larger 
cities  through   rate  favoritism. 

B  f  Trust:  Following  the  first  investigation  of  the  so-called  beef  trust 
the   United   States   Supreme  Court    handed  down   a   unanimous   decision 


THE  CRY  FOR  THE  "SQUARE  DEAL."  35 

declaring  the  big  Chicago  packers  to  be  a  combination  in  restraint  of 

trade  and  giving  a  wider  meaning  to  the  term  '"interstate  commerce," 
which  is  controlled  by  the  United  States  government. 

Investigation  of  the  Beef  Trust  ordered  by  the  Department  of  Com- 
merce and  Labor,  which  resulted  in  a  first  report  practically  exonerating 
the  packers. 

Criminal  prosecution  begun  in  the  federal  courts  at  Chicago. 

Standard  Oil:  An  investigation  of  the  Standard  Oil  company  ordered  by 
President  Roosevelt,  largely  because  Kansas  oil  producers  set  up  charges 
of  illegal  trade  conditions  maintained  by  the  Standard  in  that  state; 
this  investigation  under  the  direction  of  the  Bureau  of  Corporations  of 
the  Department  of  Commerce  and  Labor. 

Anti-trust  bills,  resolutions  or  similar  action  taken  in  a  dozen  states. 
Kansas  to  erect  a  state  oil  refinery. 

Steel:  Congress  takes  measures  to  investigate  the  United  States  Steel 
corporation,  but  forcible  action  becomes  unnecessary,  for  the  company 
furnishes  Commissioner  Garfield  of  the  Bureau  of  Corporations  with  all 
the  data  on  the  company's  business  desired  by  the  government. 

Dissolution  of  the  several  steel  material  pools  which  were  regulating 
production  and  prices  of  products  contrary  to  the  anti-trust  law—  Fear 
of  steel  magnates  that  Roosevelt  would  Investigate  and  punish  them. 

Insurance  Companies:  Recommended  thai  insurance  companies  be  placed 
under  federal  supervision. 

Greal  scandal  arises  in  the  Equitable  Life  Assurance  Society,  because 
James  II.  Hyde,  Bon  of  the  founder  of  the  company  and  inheritor  of 
control  of  the  company's  Btock,  would  not  wkV-  control  to  President 
Alexander,  friend  of  Hyde's  father  and  trustee  of  Hyde's  stock. 

Mutualization  of  the  Equitable  Life  Assurance  Society. 
Banks  and  Trust  Companies:     Secretary  of  the  Treasury  recommended  thai 
trust  companies  of  greal  power  and  capitalization  !><■  incorporated  under 
the   federal   law. 

Effort  to  have  New  York  trust  companies  make  frequenl  reports  of 
their  financial  condition  and  be  compelled  to  keep  larger  cash  reserves 

to    protect    depositor-. 

Effort  to  compel  bank  directors  actually  to  direct  banking  business 
in  which  they  are  directors  and  not  to  allow  transfer  of  control  without 
notice. 


;ii  THE  CRY  FOR  THE  "SQUARE  DEAL." 

Interstate  Business:  Recommendation  by  Commissioner  Garfield  thai  all 
companies  doing  an  interstate  business  be  compelled  to  secure  a  federal 
license  in  order  to  do  Interstate  business,  and  in  order  to  secure  such 
license  to  submit  to  certain  requirements  for  publicity. 
Labor  War:  Severe  struggles  between  the  forces  of  capital  and  the  forces 
of  labor.  Trade  unions  use  the  sympathetic  strike  in  order  to  force  cap- 
italists to  grant  concessions.     Riot  and  murder  in  the  wake  of  strikes. 

Employers  bribe  union  leaders  to  call  strikes  against  competitors  as 
a  business  weapon.  Trade  unions  revolt  from  this  bribery  and  the  em- 
ployers band  together  to  crush  out  labor  organizations.  Both  sides  use 
unfair  methods. 

The  suffering  public  insists  on  law  and  order  and  President  utters 
his  famous  Chicago  labor  peace  doctrine,  "Back  of  the  City  stands  the 
State  and  back  of  the  State  stands  the  Nation." 

Grand  .jury    investigation   into  labor  lawlessness. 
Business    Ethics:      Awakening  of  the  people  to  the   fact  that  "big  money" 

acts   upon  the  mottos  that  "Business   is   war"  and   that  "All   is   fair 

in   war." 

Demands  that  business  men  shall  be  honest  in  their  competition  and 
conform  to  the  spirit  of  honesty,  even  though  immoral  business  methods 
may   not    be  illegal. 

Graft  :  Revolt  in  great  cities  and  states  against  domination  of  legislative 
bodies  by  organized  gangs  of  corruption  forces  such  as  politicians,  con- 
tractors, labor  leaders,  etc.,  all  seeking  to  steal  money  from  the  public 
through  the  purchase  and  sale  of  valuable  legislation. 

Investigation  in  many  quarters  of  legislative  bribery  and  convic- 
tions therefor. 

Defeat  of  gangsters  in  Philadelphia  who  sought  to  steal  $100,000,- 
000  worth  of  gas  properties  through  corrupt  officials.  Reformation  of 
Mayor  Weaver  through  the  influence  of  public  remonstrance  and 
through  public  prayers. 

Stock  Market  Manipulation:  Exposures  of  practices  of  "high  financiers" 
in  trust  promotion  and  stock  watering.  Flagrant  violation  of  financial 
ethic-  in  "watering"  the  stock  of  the  United  States  Shipbuilding  Com- 
pany. Scandal  in  the  promotion  of  Montreal  Consolidated  Mining  and 
Smelting  Company,  causing  resignation  of  Vice-President  Archibald,  G. 
Loomis  of  the  National  City  Bank  of  New  York  City. 


THE  CRY  FOR  THE  "SQUARE  DEAL." 


37 


Court  orders  commanding  the  repayment  by  directors  of  unearned 
dividends  paid  out  by  them  illegally  on  the  "watered"  stocks  of  the 
American  Malting  Company,  American  Grass  Twine  Company  and 
other  corporations. 

General  cry  against  "watering"   stock  for  the  benefit  of  a  few   in- 
siders to   the  detriment    of   investors. 
Violation  of  Trust:     Big  defalcations  by  hank   presidents.     Use  of  "inside 
information"  by  directors  of  stock  corporations  for  the  purpose-  of  win- 


HAYMARKET    SQUARE,     CHICAGO. 

Hundreds  or  small   truck  farmers   with  their  wagons  loaded    with   produce  gather   hero 

and  frequently  remain  all  nlgrhl  In  order  to  hold  a  favorite  position  to  dispose  ol   their  wares 

in   the    morning.     The   monument    In    the   foreground    Indicates    the   spol    where   a    number  ol 

(lists   were  gathered   In  an   open-air   meeting.      When   a   platoon   oi    police  endeavored   to 

erse   them,  a   bomb  was  thrown   Into  their  ranks,  killing  and   wounding  scores      For  tins 
crime  several  of  the  leaders  were  executed  and  others  sent   to  prison  for  life.    The  monument 
was  erected    to   the   memory   of   the    brave   officers   who   were  assassinated   while   doing 
duty.     The  Inscription  reads:     "In  the  name  of  the  people  of  Chicago,   i   command  peace. 


nine  fortunes  in   the  slock  market   al   the  expense  <>f  legitimate  stock 
holders. 

Demand  thai   slock  "washing"  and  "matching"  orders  jn  the  slock 
markets    c<  ase. 
Genera]  Reform:     Action  by  writers  "li<>  favor  the  "square  deal,"  exposing 
on  fair  busim  ^>  dealings. 

Protesl  against  acceptance  of  John  I).  Rockefeller's  gifl  of  $100,000 


is  THE  CRY  FOR  THE  "SQUARE  DEAL." 

to  American   Hoard  of  Missions  of  the  Congregational  Church,  on  the 

charge  thai  the  money  was  tainted  and  the  fruit  of  dishonest  practices. 
Demand  for  tariff  readjustment  so  as  to  take  away  from  great  trusts 

one  of  their  principal  special  privileges. 
Municipal  Ownership:     Great  cry  in  Chicago  against  the  Wall  street  con 

trol  of  the  street  railway  system  and  the  election  of  Major  E.  F.  Dunne 

bv    a   large   majority   on   a   platform    favoring   municipal   ownership   of 

these  traction  lines. 
The    "Square    Deal":     Addresses    by    President    Roosevelt    advocating    fair 

treatment  alike  for  every  person,  whether  working  man,  middle  class,  or 

capitalist. 
Socialism:      Predictions  by   eminent   financiers   and   students,  that  socialism, 

which  appears  to  be  growing  rapidly  in  Europe  and  spreading  to  this 

country,  will  be  powerful  in  the  country's  future  politics,  especially  if 

there   is   not   some   success   in   controlling  monopoly,   which  seems   to  be 

here  to  stay. 
Publicity:    Standard    Oil,    Sugar    Trust    and    other    corporations    refuse    to 

publish  complete  financial  reports  for  benefit  of  stockholders,  but  trust 

magnates   wince  at   adverse  criticism. 

Judge  Grosscup  and  other  public  men  advocate  publicity  as  a  cure 

for  rottenness  in  politics,  finance,  labor  and  business. 


CHAPTER    H 
THE   ANTITRUST   WAVE. 

Governmental  Supervision  to  Keep  Apace  with  Industrial  Development  De- 
manded--Tlte  Cry  for  Reform  in  Business  Ethics — "Big  Money"  Must 
not  be  Allowed  to  Control  the  Laze — Night  Living  and  Right  Thinking  the 
.Basis  of  Material  Prosperity — Our  Government  Must  Stand  for  Every 
Man,  Rich  or  Poor  Alike — If  He  Does  Xo  Wrong,  He  Shall  Suffer  No 
Wrong. 

If  the  foregoing  epitome  suggests  anything  to  the  reader  of  American  his- 
tory, whether  he  be  capitalist  or  laborer  or  middleman,  it  should  be  the  con- 
clusion that  the  American  public  is  aroused  today  over  the  aggression  of  trusts, 
the  abuse  of  the  monopoly  power,  as  never  before.  Three  times  in  the  history 
of  the  industrial  combination  age  of  the  nation  anti-trust  waves  have  swept 
over  the  country.  Each  time  the  name  of  Rockefeller  has  been  prominent 
in  the  agitation.  Hack  in  1872  the  first  crusade  of  importance  was  begun. 
Then  the  cry  for  the  "square  dear'1  was  heard  in  a  different  degree;  the  slogan 
W8LB  missing  and  the  leader  of  the  great  movement  for  industrial  freedom  of 
today  was  but  a  boy.  In  that  fight  against  the  abusive  power  of  monopoly 
tin  battle  was  waged  around  what  is  now  the  Standard  Oil  banner,  although 
there  were  other  phases  of  the  struggle.  To  recount  some  of  this  history  is 
not    ami--,   for  it    may   reflect   some  of  the  causes  of  the   present    war. 

In  1872  independent  oil  producers  of  Pennsylvania  were  threatened  with 
annihilation  through  the  formation  of  the  gigantic  combination  in  which  the 
young  Standard  Oil  Company  was  a  leading  spirit.     Tins  combination  was  the 

South  Improvement  Company.  It  bad  secured  contracts  with  the  principal 
railway  trunk  lines  leading  into  the  oil  country,  by  the  terms  of  which  it  was 
to  get  a  rebate  on  the  freighl  lor  the  oil  which  it  shipped  and  a  drawback  of 
the  same  amount    on   all   oil   shipped   by    its  competitors.       When   the   independent 

oil   men   understood    the   full    import    of  this   firsi    wedge  of  the  oil   monopoly 

into   their  business,  .'i    Btorm   broke,   the    fury   of   which    was   not    slacked    until    the 

combination  was  disrupted,  the  contracts   with   tin-   railways  annulled  and   the 

arrogance   of    the   Oil    Trusi    Was    held    in    check    for   a    lime.       This   outburst    of 

popular  wrath,  together  with   the  great   "granger  movement"     the  legislation 

againsl   railway  aggression  in  the  middle  western  states     left   its  imprint  most 

99 


■mmm  . 


BUILDING    OF    "THE    TRUST    COMPANY    OF    NEW    JERSEY,"    AT    TRENTON. 

This  is  the  so-called  "home"  office  of  "The  Northern  Securities  Company,"  the  I'nited 
9  Steel  Corporation,  and  other  gigantic  business  combinations.  The  corporation  laws 
of  New  Jersey  appeal  to  promoters  and  organizers  because  they  give  them  a  sweeping 
advantage  over  minor  investors  who  may  later  acquire  the  stock.  While  other  states — 
particularly  West  Virginia  and  Michigan — limit  the  capitalization- of  corporations,  there  is 
no  maximum  as  to  the  bonded  indebtedness  or  capitalization  of  business  enterprises  organ- 
ized under  the  laws  of  New  Jersey. 


THE  ANTI-TRUST   WAVE.  41 

effectively  through  the  passage  of  the  "granger"  laws,  which  for  the  first  time 
in  history  brought  the  railways  under  the  supervision  of  state  governments. 

In  1887  another  epidemic  against  trust  aggrandizement  was  prevalent.  In 
that  year  the  Interstate  Commerce  law  was  passed,  by  which  business  transac- 
tion made  between  two  or  more  states  of  the  Union  was  brought  under  the  jur- 
isdiction of  the  federal  government.  During  the  year  following  the  Oil  Trust 
was  submitted  to  inquisitorial  proceedings  by  the  New  York  Senate  and  the 
national  Congress.  The  effects  of  this  tumult  was  to  stun  the  whole  public. 
The  nation  was  dazed  at  the  phenomenal  power  and  greed  of  the  Standard  Oil 
Trust  and  the  unfailing  certainty  of  ruin  on  the  part  of  every  person  who 
tried  to  compete  with  it.  At  the  moment  the  effect  in  law  was  not  remarkable, 
hot  in  l!S!)()  the  Sherman  Anti-Trust  Law  was  passed,  prohibiting  combinations 
in  restraint  of  trade,  and  two  years  later  the  attorney-general  of  Ohio  pro- 
ceeded in  the  Ohio  courts,  which  resulted  in  driving  the  Standard  Oil  Trust 
from  its  native  state  and  forced  it  to  fly  to  the  wide,  hospitable  asylum  of  the 
New    Jersey   corporation   laws. 

While,  as  has  been  stated  in  the  foregoing,  the  great  1905  crusade  for 
square  dealing  really  started  when  President  Roosevelt  determined  to  intercede 
in  the  horrible  war  to  the  death  in  the  great  Pennsylvania  anthracite  coal  strike 
of  1902,  in  his  order  of  that  year  to  prosecute  the  Bcri'  Trust  and  the  Northern 
Securities  Company-  or  railway  merger — under  the  Sherman  Anti-Trust  law, 
the  fruits  of  this  man's  efforts  were  not  seen  for  some  time.  It  was  during 
1902  that  Congress  went  quietly  to  work  to  feel  the  national  pulse  in  the  mat- 
ter of  monopoly  and  tnisl  abuses.  The  Fifty-seventh  Congress,  1902-1908, 
passed  four  bills  aimed  directly  at  the  trusts,  which,  of  course,  were  promptly 
signed  by  Presidenl  Roosevelt.  The  first  was  for  an  appropriation  of  $500,- 
()()()  to  be  drawn  upon  by  the  Attorney  General  of  the  United  States  to  defray 
expenses  incurred  in  prosecuting  illegal  combinations  of  capital  like  the  Beef 
'IViht  and  Railway  Merger.  This  was  the  first  nnti  trust  legislation  iii  nearly 
On  years. 

Tin-  second  movemenl  was  a  bill  in  the  interest  of  President  Roosevelt's 
idea  of  "publicity"  on  winch  he  had  dwell  in  messages  lo  Congress  and  speeches 
throughout    the   country.       This   bill,   when    it    became  a    law,   created    the    Bureau 

of  Corporations  in  the  newl}  established  Department  of  Commerce  and  Labor, 
thus  placing  dind  l\    ,it    the  disposal  of  the   President,  through  a   member  of 

Ills   cabinet,   ,i    power    winch    should    investigate   all    trusts,    monopolies,   combina 

tions,  etc.,  prepare  statistics  of  trade  conditions  and  report   to  Congress  results 

and   conclusions.       It    was   under   Ibis   bureau.    Hie   first    chief  of   which    was   Com 


i:  / •///■:  ANTI-TRUST   WAVE. 

missioner  James  K.  Garfield,  sou  of  the  martyred  President,  thai  the  investi 
gations  and  prosecutions  <>t'  tin-  trusts  which  made  11)05  famous  were  conducted. 
The  third  trusi  bill  was  the  Elkins  Act,  which  professed  to  aid  the  Inter- 
state Commerce  Commission  in  dealing  with  the  railroads  and  other  common 
carriers  thai  gave  illegal  rebates  on  freight  rates.  In  reality  the  effect  of  the 
law  has  been  nil,  and  it  has  been  charged  that  the  Senate  devised  the  law  in 
behalf  oi'  the  railway  interests  in  order  to  dodge  the  penalties  of  existing  stat- 
utes This  act  struck  out  the  provision  for  punishment  for  violation  of  the 
law  hv  imprisonment  as  well  as  by  fine.  The  maximum  fine  of  $20,000  fixed 
hv  this  law  has  not  vet  been  sufficient  to  prevent  large  railways  from  breaking 
the  laws  hv  granting  unfair  privileges  to   favored   shippers. 

The-  fourth  hill  was  designed  to  aid  the  public  in  its  fight  for  the  "square 
deal"  and  provided  measures  for  curbing  illegal  monopolies  by  removing  such 
cases  pending  in  the  Circuit  Courts  to  a  hearing  before  a  bench  composed  of 
three  judges  and  by  carrying  appeals  from  the  Circuit  Court  directly  to  the 
Supreme  Court  of  the  United  States.  This  "short  cut"  through  the  courts  was 
used  in  the  case  of  the  government  against  the  Coal  Trust  when  the  right  of 
the  Interstate  Commerce  Commission  to  compel  witnesses  to  produce  contracts 
and  private'  accounts  was  questioned. 

These  four  bills  are  the  latest  anti-trust  legislation  enacted.  Early  in  1905 
the  House  of  Representatives  passed  by  an  almost  unanimous  vote  the  Esch- 
Townsend  bill,  favored  by  President  Roosevelt,  providing  for  the  regulation 
nt'  railway  rates.  But  the  Senate  did  not.  concur  and  a  long  investigation  of 
railway  conditions  followed. 

Up  to  tin  enactment  of  these  laws  actual  results  from  the  anti-trust  wave 
had  been  few  and  had  been  restricted  to  suits  in  the  courts  and  injunctions  in 
a  few  cases  against  trusts,  the  chief  of  which  was  in  the  Beef  Trust  case  in 
Chicago  before  Judge  Grosscup.  In  1903,  however,  the  United  States  Circuit 
Court  of  .Minnesota  declared  tin  Northern  Securities  Company  an  illegal  com- 
bination. Shortly  after  this  the  Missouri  Supreme  Court  found  the  principal 
packers  in  tin  Beef  Trust  guilty  under  the  anti-trust  law  and  fined  five  of  them 
$5,000  each.  After  this  followed  thick  and  fast  investigations  of  the  Coal 
Trust,  Standard  Oil  and  several  gas  monopolies  in  various  states,  the  enuncia- 
tion of  the  doctrine  of  the  "square  deal,'"  the  Kansas  blow  to  Standard  Oil, 
which  resulted  from  the  announcement  that  that  trust  would  buy  no  more  oil 
in  Kansas,  tin  far-reaching  reports  and  recommendations  of  Commissioner  (Jar- 
field  and  Secretary  Met  calf  looking  to  federal  control  of  interstate  commerce 
companies  and  tin    hue  and  civ  against  John  D.  Rockefeller's  "tainted  money." 


THE  ANTI-TRUST   WAVE. 


43 


What  the  results  of  this  anti-trust  movement  will  be  arc  doubtful.  There 
are  two  distinct  views  of  the  problem:  One  is  that,  monopoly  is  essentially 
wrong  and  that  the  trusts  which  have  this  monopoly  or  partial  monopoly  must 
be  rooted  out  of  existence  to  make  room  for  a  return  of  the  old  conditions 
where  the  business  of  the  country  was  conducted  by  myriads  of  small  traders, 
small  partnership  concerns,  small  corporations,  small  railways;  where  small 
communities  were  the  rule  rather  than  large  cities;    where  the  farmer  did  work 


WHERE    THE    DIRECTORS    Or    THE    UNITED    STATES    STEEL    CORPORATION    MEET. 

Meeting   """ii   ni  "The  Trust   Company  of  New  Jersey"  building.     Here  the  directors  of 
hundred*   •■!    rorporatlom    meet   a1   times,  and   manj    .1   large  financial  deal   has  1 n   planned 

in   this   room. 


"on  shares"  instead  of  owning  thousands  of  aero  of  lands;  where  the  ranch 
man  had  but  a  fe*  head  of  cattle  instead  of  hundreds  and  thousands  of  herds. 
Tin-  other  view  is  thai  evolution  has  changed  conditions  so  materially  thai 
monopoly  i-  here  to  -!.i\  ;  thai  economic  methods  demand  greater  and  greater 
combinations  both  of  industrial  concerns  and  of  railway  corporations;  thai 
banking  today  musl   be  done  on  Mi.    ..inn    gcale  with  the  enormous  crrowth  of 


U  THE  ANTI-TRUST   WAVE. 

wealth;  thai  to  return  to  the  condition  where  the  smaller  trader  ruled  would 
be  as  unprogressive  as  going  back  to  the  use  of*  the  stagecoach  Instead  of  the 
railway,  the  pony  posl  Instead  of  the  postoffice  department,  the  hand  seeder 
instead  of  the  gang  plow  and  drill,  the  cradle  scythe  instead  of  the  steam 
mower,  reaper  and  binder,  tin-  sail  boat  instead  of  the  ocean  greyhound. 

The  perusal  of  the  following  pages  will  point  many  conclusions  which  favor 
the  latter  view.  The  pertinent  question  therefore  arises  how  best  to  control 
the  enormous  power  which  rapidly  has  been  concentered  in  the  hands  of  such 
great  industrial  and  financial  oligarchies  as  the  Money  Trust,  the  Beef  Trust, 
the  Oil  Trust,  the  Railway  Trust,  the  Coal  Trust,  the  Steel  Trust,  the  Copper 
Trust,  etc..  etc.  Already  legislation  Looking  to  this  control  has  made  fair 
headway  and  there  is  promise  for  more  before  President  Roosevelt  accomplishes 
his  purpose  of  freeing  industrial  America  from  dangers  of  downright  serfdom. 
With  the  motto  "Business  is  war."  the  great  captains  of  industry  have  given 
little  thought  of  the  serious  possibility,  now  become  fact,  that  there  is  such  a 
tiling  as  business  morality.  Heretofore  the  test  of  right  lias  been  the  statute 
law.  If  it  has  not  been  "against  the  law"  the  "big  money"  of  the  country  has 
termed  it  right.  Standard  Oil  recently  put  up  the  pitiful  plea  that  "slavery 
in  certain  sections  of  the  United  States  was  legal  until  President  Lincoln's 
Proclamation  of  Emancipation  and  rebates  on  railroads  were  just,  as  legal  until 
the  passage  of  the  Interstate  Commerce  Act."  The  implication  found  here, 
that  slavery  was  not  wrong  until  it  was  declared  illegal,  indicates  a  peculiar 
moral  standard  which  would  make  assault,  rapine,  theft,  burglary  and  even 
murder  innocent  if  there  were  no  legal  code. 

Under  the  scheme  of  business  ethics  as  thus  defined,  the  captain  of  industry 
could  dare  to  do  in  his  office  what  he  never  would  think  of  doing  in  his  home. 
Under  this  code,  if  there  were  no  law,  common  or  statutory,  in  existence,  it 
would  be  right  for  one  man  to  bargain  with  railroads  not  only  to  serve  him 
.it   a   much  lower  charge  than  his  rivals  in  business,  but  to  pay  over  to  him  the 

-  collected   from  those  rivals.     Under  this  code  the  trust  manager  or  "big 

iness"  man  would  be  justified  in  using  any  available  device  or  practice  to 
annihilate  his  rival  in  business  and  get  possession  of  all  his  property.  Dis- 
tinctly Standard  Oil  sets  up  the  new  motto  "Everything  that  does  not  incur 
punishment  for  crime  is  good  morals  in  business." 

Here  seems  to  be  the  ^ist   of  the  whole  fight   against  monopoly  and  trust 

Ejgrandizement.      If  the  law  does  not  prohibit  an  act,  apparently  it  is  not   a 

wrong.      If  "big  money"    is  big  enough   to  control   the  law,  as  has  been   shown 

time  and   again   in   legislative  bribery,  the  vicious  business  ethics  suggested   in 

this  new    motto  will  be  the  law  of  conduct. 


THE  ANTI-TRUST   WAVE.  45 

President  Roosevelt  enunciated  principles  which  now  are  working  to  over- 
come such  had  business  morals  when  he  said,  "Neither  this  people  nor  any  other 
free  people  will  permanently  tolerate  the  use  of  the  vast  power  conferred  by 
vast  wealth — and  especially  by  wealth  in  its  corporate  form — without  lodging 
somewhere  in  the  government  the  still  higher  power  of  seeing  that  this  Powel- 
ls used  for  and  not  against  the  interests  of  the  people  as  a  whole. 

'"The  principles  which  Lincoln  applied  to  the  solution  of  the  problems  of 
his  day  are  those  which  we  must  apply  if  we  expect  successfully  to  solve  the 
different  problems  of  our  own  day — problems  which  are  so  largely  industrial. 
Exactly  as  it  is  impossible  to  develop  a  high  morality  unless  we  have  as  a 
foundation  those  qualities  which  give  at  least  a  certain  minimum  of  material 
prosperity,  so  it  is  impossible  permanently  to  keep  material  prosperity  unless 
there  is  hack  of  it  a  basis  of  right  living  and  right  thinking. 

"In  the  last  analysis,  of  course,  the  dominant  factor  in  obtaining  this  good 
conduct  must  he  the  individual  character  of  the  average  citizen.  If  there  is 
not  this  condition  of  individual  character  in  the  average  citizenship  of  the 
country  all  effort  to  supply  its  place  by  the  wisest  legislation  and  administra- 
tion will  in  the  end  prove  futile.  Hut,  given  this  average  of  individual  char- 
acter, then  wise  laws  and  the  honest  administration  of  the  laws  can  do  much 
to  supplement  it.  If  either  the  business  world  or  the  world  of  labor  loses  its 
head,  then  it  has  lost  something  which  cannot  he  made  good  by  any  govern 
mental  effort.  Our  faith  in  the  future  of  the  repuhlic  is  firm,  because  we 
believe  that,  on  the  whole  and  in  the  long  run,  our  people  think  clearly  and 
act  rightly. 

■•1  nquestionably,  however,  the  great  development  of  industrialism  means 
that  there  must  he  an  increase  in  the  supervision  exercised  by  the  government 
over  business  enterprises.  'I 'he  supervision  should  not  lake  the  form  of  violent 
and  ill-advised  interference;  and  assuredly  there  is  danger  lest  it  take  such 
form  it  tin  hiiMnc>>  leaders  of  the  business  community  confine  themselves  to 
trying  to  thwarl  the  effort  at  regulation  instead  of  guiding  it  aright. 

"Meanwhile  the   men    in    public   life  and    the   men    who  direct    the   great    bus] 

nesa  interests  of  tin-  country  should  work   not    in  antagonism  hut    in   harmonj 
toward  this  given  end.     In  entering  •■•  field  where  the  progress  must  of  neces 
Bity  he  so  largely  experimental  it   is  essential  that   tin    effort   to  make  progress 
should  he  tentative  and  cautious. 

"We  musl  gron  by  evolution,  not  by  revolution.  There  must  he  no  hurry, 
hut  there  mii-t  also  l»e  no  halt  and  those  who  are  anxious  that  there  should  he 
no    sudden    and    violent    changes    must    remember   thai    precisely    these    sudden 


Ki  THE  ANT1  TRUST   WAVE. 

and  violent  changes  will  be  rendered  likely  it'  we  refuse  to  make  the  Deeded 
changes  in  cautious  and  moderate  manner. 

"At  the  present  moment  the  greatest  need  is  for  an  increase  in  the  power 
of  the  national  government  to  keep  the  great  highways  of  commerce  open 
alike  to  all  on  reasonable  and  equitable  terms.  Less  than  a  century  ago  these 
highways  were  still,  as  they  bad  been  since  the  dawn  of  history,  either  water- 
ways, natural  or  artificial,  or  else  ordinary  roads  for  wheel  vehicles  drawn  by 
animal  power.  The  railroad,  which  was  utterly  unknown  when  our  govern- 
ment was  formed  and  when  the  great  principles  of  our  jurisprudence  were  laid 
down,  has  now  become  almost  everywhere  the  most  important,  and,  in  many 
large  regions,  the  only  form  of  highway  for  commerce.  The  man  who  controls 
its  use  cannot  be  permitted  to  control  it  in  his  own  interest  alone. 

''It  is  not  only  just,  but  it  is  in  the  interest  of  the  public,  that  this  man 
should  receive  the  amplest  payment  for  the  masterful  business  capacity  which 
enables  him  to  benefit  himself  while  benefiting  the  public;  but  in  return  he 
must  himself  recognize  his  duty  to  the  public.  He  will  not  and  cannot  do  this 
if  our  laws  are  so  defective  that  in  the  sharp  competition  of  the  business  world 
the  conscientious  man  is  put  at  a  disadvantage  by  his  less  scrupulous  fellows. 

"It  is  in  the  interest  of  the  conscientious  and  public  spirited  railroad  man 
'bat  there  should  be  such  governmental  supervision  of  the  railway  traffic  of  the 
country  as  to  require  from  his  less  scrupulous  competitors,  and  from  unscru- 
pulous big  shippers  as  well,  that  heed  to  the  public  welfare  which  he  himself' 
would  willingly  give  and  which  is  of  vital  consequence  to  the  small  shipper. 

"In  some  such  body  as  the  Interstate  Commerce  Commission  there  must  be 
lodged  in  effective  shape  the  power  to  see  that  every  shipper  who  uses  the  rail- 
roads and  every  man  who  owns  or  manages  a  railroad  shall  on  the  one  hand 
be  given  justice  and  on  the  other  hand  be  required  to  do  justice. 

"Justice,  so  far  as  it  is  humanly  possible  to  give  and  to  get  justice,  is  the 
foundation  of  our  government.  We  arc  not  trj-ing  to  strike  down  the  rich 
man  :  on  the  contrary,  we  will  not  tolerate  any  attacks  upon  his  rights.  We 
arc  not  trying  to  give  an  improper  advantage  to  the  poor  man  because  he  is 
poor,  to  the  man  of  small  means  because  he  has  not  larger  means;  but  we  are 
-t riving  to  see  that  the  man  with  small  means  has  exactly  as  good  a  chance, 
so  far  as  we  can  obtain  it  for  him,  as  the  man  of  larger  means;  that  there 
shall  be  equality  for  the  one  as  for  the  other. 

"We  do  not  intend  that  this  republic  shall  ever  fail  as  those  republics  of 
olden  times  failed,  in  which  there  finally  came  to  be  a  government  by  classes, 
which  resulted  either  in  the  poor  plundering  the  rich  or  in  the  rich  exploiting, 


THE  ANTI-TRUST    WAVE. 


47 


and  in  one  form  or  another  enslaving,  the  poor,  for  cither  event  means  the 
destruction  of  free  institutions  and  of  individual  liberty.  Ours  is  not  a  gov- 
ernment which  recognizes  classes.  It  is  based  upon  the  recognition  of  the  indi- 
vidual. We  are  not  for  the  poor  man  as  such,  nor  for  the  rich  man  as  such. 
We  are  for  every  man,  rich  or  poor,  provided  he  acts  justly  and  fairly  by  his 
fellow,  and  if  he  so  acts,  the  government  must  do  all  it  can  to  see  that,  inas- 
much as  he  does  no  wrong,  so  he  shall  suffer  no  wrong." 


THE    "SEARCHLIGHT"    BY    ROENTGEN    "X"    RAYS. 

It  is  less   than   ten   years  sin..-   the   announcemeni    was   made  <<f  a   <iis.-nv.Tv  by  which 

ires  could   \»-  taken  sin.winK'  the  Interior  ..i    the  human   body.     Thla  announcement   waa 

•  i    with    widespread    Incredulity     bul    with   experience  the   public   baa   become    familiar 

with  the  pictures  and  the  phenomena  Involved  in  their  production,  and  the  stage  of  wonder- 

i    has  almosl   passed.     The  discoverer  wa      Profi      01    R tgen  of  Wuraburg  University, 

Germany.     As  the  peculiar  eh  generated  were  an  unknown  quantity,  in-  designated 

ilgebrah  term  of  X  hence  the  common  term  of  "X-Rays."  is  it  i...,  much  t.> 
auppoae  thai  with  the  aid  <>r  science  tii>-  time  may  come  when  a  man's  heart — for  good  or 
evil — can  i»-  searched  and  examined   by  some  such   method? 


JACOB   H.   SCHIFP, 


Of   Knhn,  Loeb  &  Co.,   one  of  the  largest  pri- 

■  inking   institutions    in    the   world. 


CHARLES    S.    FAIRCHILD, 


Ex-Secretary    United    States    Treasury,    a    di- 
rector of   the  National  City   Bank. 


JAMES    R.    KEEKE, 

The    World-famous    Speculator. 


Has 


COE.    JOHN    JACOB    ASTOR, 

a    fortune    of    over    one    hundred    million 
dollars  and  Is  the  richest  land  owner 
living    in   America. 


WILLIAM    ROCKEFELLER, 
or   the   Standard    Oil   Company 


HENRY    II.    ROGERS. 

Of  Standard   Oil   "system"    fame. 


JAMES    STILLMAN, 
,  !.  ,ii    National   C11  \    Bank,    N'-w    roi  k. 


GEORGE  W.  PERKINS, 
The  able  partner  of  J.  Plerponl    U 


CHAPTER   Til 

WHO  OWNS  THE  UNITED  STATES? 

.V<  w  York  the  Financial  Center  of  Our  2V 'ation — Enormous  Influence  of  Twenty- 
three  Men  in  Wall  Street,  Composing  the  Greatest  Money  Power  in 
America — Two  Hundred  Millions  of  Dollars  Deposited  in  One  Bank — Four- 
teen Trusts,  Whose  Captains  Are  of  the  National  City  Hank  Directory, 
Represent  Thirty-eight  Per  Cent  of  the  Capitalization  of  All  the  Industrial 
Trusts  of  the  Country — Great  $5,000,000  Banks — Power  of  Trust  Com- 
panies—  World's  Saving  Deposits. 

In  a  modest,  old-fashioned  building  in  Wall  Street,  so  modest  that  it  seems  out 
of  place  in  the  locality  of  the  canon-like  streets  of  America's  great  financial 
center,  there  gather  occasionally  about  a  directors'  table  twenty-three  men  who 
all  but  own  the  United  States.  They  are  the  directors  of  the  National  City 
Bank  of  New  York  City,  the  greatest  bank  of  America,  and  they  represent  a 
total  financial  power  of  $11,000,000,000,  or  about  one-tenth  the  entire  wealth 
of  the  United   States. 

It  would  be  incorrect  to  state  that  these  men  arbitrarily  could  dispose  of  this 
vast  amount  of  wealth,  but  their  judgment  would  go  far  toward  deciding  the 
destinies  of  the  nation  in  respect  to  its  financial  welfare.  Indeed,  they  are 
almost  what  public  opinion  has  called  them,  "money  kings,"  whose  subjects  in  a 
sense  are  the  people  whose  savings  arc  employed  to  carry  on  the  great  industries 
of  the  country.  Their  names  are  known  the  world  over,  for  they  stand  for 
all  that  is  great  in  finance  and  commerce.  Even  the  law-makers  of  the  country 
listen  to  what  they  say,  for  these  twenty-three  men  represent  the  trusts  of 
America. 

Let  us  glance  over  the  roster  of  names  of  this  powerful  body  of  men  and 
see  who  they  are  and  what   they  represent.      This  board  of  directors  is  com 
posed  of: 

William  Rockefeller,  of  the  Standard  Oil  company,  the  most  powerful 
single  organization  on  earth. 

George  W.  Perkins,  business  partner  of  J.  Pierpont  Morgan,  the  world- 
famed  financier  and  promoter  of  trusts  and  giant  corporations. 

Jacob  II.  Schiff  of  the  firm  of  Kuhn,  Loeb  &  Co.,  one  of  the  greatest  bank- 
ing houses  of  the  world, — so  great,  in  fart,  that  within  two  days  it  raised  sub- 

50 


WHO   OWNS    THE    UNITED   STATES?  51 

scriptions  for  $500,000,000  to  supply  the  Japanese  government  with  the  money 
with  which  to  carry  on  the  war  with  Russia. 

Edward  H.  Harriman,  railway  king,  president  of  the  Union  Pacific  Railroad 
company  and  many  other  organizations. 

P.  A.  Valentine,  of  Armour  &  Co.,  representative  of  the  great  Beef  Trust. 

Henry  0.  Havemeyer,  president  of  the  American  Sugar  Refining  company, 
the  Sugar  Trust. 

John  A.  McCall,  president  of  the  New  York  Life  Insurance  company. 

Cyrus  H.  McConnick,  president  of  the  McCormick  Harvesting  .Machine 
company  and  representative  of  the  Harvester  Trust. 

Henry  C.  Prick,  steel,  coal  and  coke  magnate. 

Moses  Taylor,  vice-president  Lackawanna  Iron  and  Steel  Co. 

Samuel  Sloan  of  the  Delaware,  Lackawanna  &  Western  R.  R.  Co. 

Stephen  S.  Palmer,  president  of  the  New  Jersey  Zinc  Co. 

John  W.  Sterling  of  Shearman  &  Sterling. 

James  II.  Post  of  B.  II.  Howell,  Son  &  Co. 

Francis  M.  Bacon  of  Bacon  &  Co. 

Cleveland  H.  Dodge  of  Phelps,  Dodge  &  Co. 

Charles  S.  Fairchild,  chairman  New   York  Security  &  Trust  Co. 

James  StiDman,  president;  ally  of  John  1).  Rockefeller. 

.James  A.  Stillman,  assistant  cashier  and  director. 

Edwin  S.  Marston,  presidenl  Farmers'  Loan  &  Trust  Co. 

William  Douglas  Sloane  of  W.  .V  .J.  Sloane. 

M.  Taylor  Pyne. 

I  I<ii r \    A.  (  .  Taj  lor. 

In  tin  hands  <>f  these  men  lie  perhaps  the  greatest  money  power  in  America. 

if  not  in  the  world.     While  they  in  themselves  do  not  constitute  all  the  so-called 

"Money  Trust,"  still   this  hank  of  hanks  of  America   is   powerful  enough   to 

wield  almost  unlimited  sway  in  the  world  of  dollars,  and  does,  indeed,  make  its 

trength   fell  often. 

N«  w  York  is  recognized  as  the  financial  center  of  the  Western  hemisphere, 
for  many  years  to  come,  it'  not  for  all  time.     It  even  is  fasl  encroaching  upon 

Ihe  position  thai    London   has  long  held  as  financial  center  of  the  world.       When. 

then,  it   is  said  thai  the  deposits  of  the  National  City  Hank  amount  to  nearh 

0,000,000  of  the  people's  money,  or  over  1  I-  per  cent  of  all  the  deposits  of 

the  fit'i\  three  clearing  house  hank-  of  New  York  City,  and  thai  it  has  ;l  capital 

and  surplus  of  over  $42,000,000,  or  more  than  16  per  cent  of  the  entire  cap- 


WHO   OWNS    THE    UNITED   STATES? 

ital  and  surplus  of  these  associated  batiks,  it  will  be  seen  what  a  powerful  factor 
this  bank  i>  in  Wall  Street,  America  ami  the  world. 

Hut  when  this  is  said  not  all  has  been  stated.  For  this  hank  is  the  head  of 
group  of  banks,  twelve  in  number,  which  arc  under  its  influence  through  close 
affiliation  of  boards  of  directors,  of  interrelated  ownership  of  capital  stuck,  etc. 
As  center  of  this  banking  group  the  power  of  the  National  City,  or  "Standard 
Oil  Bank,"  as  it  is  generally  known  because  it  is  the  financial  organ  of  .John  D. 
Rockefeller  and  his  lieutenants,  is  enormous. 

Let    us   put   the  matter   more  clearly. 

In  the  United  States  there  are  about  1 4,000  national  and  state  banks,  trust 
companies  and  private  bankers.  These  institutions  control  about  $11,000,000,- 
000  of  the  people's  wealth  and  savings  in  deposits.  Now  the  National  City 
group  of  twelve  New  York  banks  alone  controls  one-twentieth  of  all  the  power 
of  all  the  banks  in  the  United  States  and  actually  the  loans  of  this  group  amount 
to  almost  half  a  billion  dollars. 

But  we  cannot  stop  here.  The  machinery  of  influence  and  inter-control 
goes  still  further.  This  influence  is  not  in  dollars  alone,  nor  is  it  confined  in 
any  sense  to  New  York  City  alone.  Through  the  practice  of  country  banks 
depositing  in  city  banks  and  all  city  banks  holding  some  of  their  money  on 
balance  in  New  York  City  this  money  power  has  become  almost  supreme  through 
th(  banking  influence  alone.  But  the  life  insurance  company  reaches  out  and 
rbs  the  people's  savings  to  a  marvelous  degree.  This  money  and  industrial 
influence  largely  centers  in  the  eastern  Money  Trust.  Still  further,  as  was 
stated  before,  the  other  great  trusts  of  the  country,  the  partial  monopolies  of 
t  industries,  are  represented  in  this  money  group.  Some  of  the  trusts  are 
Hk  United  States  Steel  corporation,  or  Steel  Trust;  the  International  Mercan- 
tile Marine,  or  Ship  Trust;  the  United  States  Realty  and  Construction  Com- 
pany, or  Building  Trust;  the  Standard  Oil  Company;  Armour  &  Co.,  member 
of  the  Beef  Trust;  the  Amalgamated  Copper  Company,  or  Copper  Trust;  the 
Union  Typewriter  Company;  the  American  Brass  Company;  the  Allis-Chal- 
mers  Company;  the  Colorado  Fuel  &  Iron  Company:  the  International  Ilar- 
i-  Company,  etc.  Fourteen  of  the  trusts  whose  captains  are  of  the  National 
City  Bank  directory  represent  38  per  cent  of  the  capitalization  of  all  the  indus- 
trial  trusts   of  the   country. 

Then  there  is  the  railway  influence.  Nearly  every  part  of  the  nation  is 
touched  by  a  road  directly  represented  by  the  twenty-three  directors  of  the 
National  City  Bank.  Principal  of  these  roads  are  the  Lackawanna,  the  C,  B. 
&  Q.,  the  Union  Pacific,  the  Alton,  the  Missouri  Pacific,  the  Northwestern,  the 


WHO   OWNS    THE    UNITED   STATES?  53 

St.  Paul,  the  Rock  Island,  the  Denver  &  Rio  Grande,  the  Mexican  National,  the 
B.  &  O.,  the  Northern  Pacific,  the  Southern  Pacific,  the  New  York  Central,  the 
Texas  tSj  Pacific,  the  Eric,  the  New  York,  New  Haven  &  Hartford,  the  Delaware 
&  Hudson,  the  Illinois  Central,  the  Manhattan  Elevated  of  New  York  City  and 
the  Rapid  Transit  lines  of  Brooklyn. 

In  NVw  York  City  there  are  two  other  very  powerful  banks — the  National 
Bank  of  Commerce  and  the  First  National  Bank.  These  two  with  the  National 
City  are  the  three  greatest  institutions  of  the  country.  If  they  actually  were 
under  one  control  they  would,  indeed,  be  a  triumvirate  all-embracing.  These 
two  other  banks  in  turn  have  chains  of  influences  in  New  York  likened  to  that 
<>}'  the  National  City  Bank.  The  great  life  insurance  companies  with  head- 
quarters in  New  York  and  assets  amounting  to  about  a  billion  and  a  quarter 
of  dollars  and  very  closely  allied  with  the  great  banking  house  of  Morgan  & 
Co.  come  largely  under  the  influence  of  these  two  latter  banks.  This  insurance 
interest  makes  them  almost  one  family. 

There  are,  then,  two  great  banking  families  in  New  York,  and  on  close 
discrimination  there  may  be  three.  But  what  is  the  relationship  between  these 
families?  In  fact  intermarriage  has  been  so  frequent  that  while  the  two  prin- 
cipal families  still  remain  distinct,  when  the  occasion  demands  they  may  have 
a  reunion.  In  this  case  President  Stillman  of  the  National  City  Bank,  as  the 
representativ<    of  "Standard  Oil"  or  the  Rockefellers,  whichever  you  choose  to 

call    it.    would    >it    at    the    head   of   the   table.      The   twenty-three   directors   of    this 

chut'  bank  through  their  various  and  far-reaching  relations  and  influences 
would  represent  over  350  other  banks,  trust  companies,  railroads  and  industrial 
corporations  whose  aggregate  financial   power  may  be  summarized  thus: 

[nsurano    company    assets $1,288,000,000 

National    and    state   assets 620,000,000 

Saving   banks  assets    272,( ><>(),<)()() 

Trusl    companies   assets 758,000,000 

Railroads,   capitalization    5,300,000,000 

[ndustrial    and    miscellaneous   corporations,   capi 
tali/at  ion     2,852,000,000 

'lot.-, I    financial    power    $11,040,000,000 

Great  $6,000,000  Hauls     More  Giant  Institution*  Than  Ever  Before. 

There  are  now  more  banks  in  tin-  United  Stales  with  deposits  of  $5,000,- 
000  or  ovi  i   than  i  vi  r  before  in  the  history  of  banking.     Statistics   it  the  office 


54 


117/0    OWNS    THE    EXITED    STATES? 


YfWU 


of  the  comptroller  of  currency  at  Washington  show  no  less  than  1-14  such 
institutions.  Naturally  New  York  heads  the  list,  with  thirty-one  to  its  credit. 
Boston  is  second  with  twelve  and  Philadelphia  has  eleven.  Chicago  has  nine, 
Pittsburg  seven,  Cincinnati  and  St.  Louis  six  each,  Cleveland  and  Baltimore 
five  each,  Kansas  City,  Indianapolis  and  New  Orleans  four  each;  Denver,  San 
Francisco,  Minneapolis,  Newark,  N.  J.,  Detroit  and  St.  Paul  three  each; 
Milwaukee,  Buffalo,  Albany,  Omaha, 
Los  Angeles  and  Brooklyn  two  each; 
and  Birmingham,  Duluth,  Dallas, 
Rochester,  Atlanta.  Scranton,  Port- 
land, Ore.,  Jersey  City,  Washington 
and  Pueblo  one  each. 

The  leader  of  all  these  gigantic 
banks  in  the  matter  of  gross  deposits 
is  the  National  City  Bank  of  New 
York  City,  the  great  bank  of  banks 
and  money  representative  of  the 
Rockefellers  and  Standard  Oil  inter- 
ests. It  has  over  $200,000,000  of 
deposits.  The  National  Bank  of 
Commerce  and  the  First  National 
Bank  of  New  York  and  the  First 
National  Bank  of  Chicago,  with  de- 
posits running  from  almost  $100,- 
000,000  for  the  last  named  to  over 
$200,000,000  for  the  first,  follow 
closely  in  the  order  named. 

The  growth  of  the  banks  with 
such  large  holdings  of  the  people's 
wealth  can  be  traced  almost  wholly  to 
tlii  marvelous  advance  in  prosperity 
the  country  has  enjoyed  in  receni 
years.  In  1900  there  were  only  115 
banks  of  this  class.  And  even  some 
of  those   were  merged   with   other  hanks,   making  larger  institutions. 

Following    is    a    table   of    the    twenty-two   largest    national    banks   of   the 
country  with  the  amount  of  their  deposits  in  1905: 


£  ^  S?  ri  S  £  & 


WWW' 

W     1!      1-      ■_      ft_ 


HOME     OP    THE    FIRST    NATIONAL    BANK, 
CHICAGO. 

This  new  building,  completed  in  1905,  is  built 
of  granite  and  steel  an<3  is  fireproof.  It  is 
17  stories  in  height  and  covers  inure  than  one 
solid  quarter  nf  a  city  block.  An  office  build- 
ing of  this  size  bouses  more  employes  than 
there  are  people  in  a  small  city.  The  First 
National  Bank,  owner  of  the  building,  is  the 
fourth  largest  National  bank  in  the  country, 
with  deposits  of  Close  to  one  hundred  million 
dollars. 


WHO   OWNS    THE    UNITED   STATES?  55 

National  City,  New  York $201,340,000 

National  Bank  of  Commerce,  New  York 192,660,000 

First  National,  New  York 101,650,000 

First  National,   Chicago 94,123,000 

National  Park,  New  York 90,790,000 

Hanover,   New   York 89,170,000 

Chase,   New   York 61,056,000 

Continental,    Chicago    52,000,000 

National  Bank  of  Commerce,  St.   Louis 50,525,000 

National   Shawmut,   Boston 49,150,000 

Corn  Exchange,   Chicago 46,000,000 

First    National,    Boston 41,200,000 

Fourth    Street,    Philadelphia 39,800,000 

Philadelphia    National,    Philadelphia 38,900,000 

American    Exchange,   New   York 38,730,000 

Fourth,   New   York 33,350,000 

Commercial    National,    Chicago '. 33,000,000 

Nat.   Bank  of  Commerce,  Kansas  City 31,400,000 

.Mechanics    National.    New    York ." 31,320,000 

Bank  of  New  York,  N.  B.  A.    New  York 31,030,000 

Girard   National,  Philadelphia 30,750,000 

Chemical    National,   New    York 30,260,000 

Civilized  Nations  Report  N2,64().()()0  People  Saving  up  Money  for  Old  Age — 
I),  posits  are  $10,500,000,000 — United  States  Leads  -with  $3,060,178,611. 

The  people  of  the  United  States  of  all  classes  and  of  almost  every  stage  of 
life  are  notoriously  greal  spenders.  Compared  with  the  frugal  German  and 
tin'  economic  Frenchman  Americans  cannot  he  said  to  he  great  savers.  We  as 
a  people  are  lavish  with  our  expenditures  and  the  Frenchman,  who  always 
figures  <m  having  a  surplus  from  liis  income,  well  may  shame  us  who  as  a 
nation  have  piled  up  great  wealth  not  he  economy,  hut  by  the  marvelous  rich- 
ness id'  material  resources  such  as  ores  in  our  mines,  fertility  in  our  soil  and 
ingenuity   in   the  brains  of  our   people  to  invent    new   ways  of   producing  wealth. 

Nevertheless,  this  country  actually  is  the  greatest  nation  of  savers,  accord 
ing  to  the  banking  statistics,  thai  exists  today.  For  of  a  total  of  over  $10,- 
500,000,000  of  savings  hank  deposits  of  the  principal  countries  of  the  world 
the  United  States  claims  $8,060,178,611,  or  over  29  per  cut  of  .all.  The 
number  of  savings  depositors  of  tin  principal  countries  of  the  world  is  82," 
640,000,  of  which   the   United   States   furnishes  7,805,000,  or  about    !)'-   per 

cent.       When    it    is   considered    that    the   figures    here   compared    cover   about    one 

half  the   population   of   the   world,   namely    over  770,000,000,   it    will   he  seen 


WHO   OWNS    THE    UNITED   STATESf 

liou  great  a  factor  the  United  States  is  in  the  actual  savings  of  the  whole 
world.  Of  the  total  number  of  depositors,  or,  rather,  deposit  accounts,  the 
shore  of  the  United  States  is  somewhat  less  than  9  per  cent,  while  the  average 
deposit  per  account  is  more  than  four  times,  and  the  average  savings  per 
inhabitant  more  than  three  and  one-hall'  times,  the  corresponding  averages  for 
the  rest  of  the  world. 

Let  us  glance  at  the  following  table  of  the  number  of  depositors,  total 
amount  of  deposits,  the  average  deposit  accounts  and  the  average  deposit  per 
inhabitant  in  all  those  countries  which  publish  reports  on  the  state  of  their 
-a\  ings  inst  Itutions : 

Number  of  T  nPPn<jiT«  Average      Am'tpbb 

Depositors.  iotal  deposits.  Deposits.       Inhab't. 

Australia    1,086,018     $      164,161,981  $151.15  $43.47 

Austria    4,946,307  876,941,933  177.^9  33.47 

Belgium    2,088,448  141,851,419  67.92  20.37 

Canada    213,638  60,771,128  289.14  10.99 

Denmark     1,203,120  236,170,057  196,29  96.41 

France    11,298,47-1  «S47,224,910  75.01  21.75 

Germany     15,432,211  2,273,406,226  147.38  39.98 

•  Prussia    9,377,503  1,485,793,500  158.44  43.1 0 

Holland    1,330,275  72,738,817  54.83  13.60 

Hungary    1,717,515  432,810,515  251.91  21.92 

India,  British   866,693  34,656,371  39.98  .15 

Italy     6,740,138  482,263,472  71.55  14.52 

Japan    7,467,452  40,887,186  5.48  .90 

New  Zealand    261,948  38,332,823  146.34  49.61 

Norway     718,823  89,633,481  124.69  39.94 

Roumania     145,507  7,426,031  51.04  1.26 

Russia,  including  Asiatic  part  4,950,607  445,014,951  89.90  3.16 

Finland     226,894  21,144,278  93.19  7.60 

Sweden     1.892,586  151,480,442  80.54  29.14 

Switzerland     1,300,000  193,000,000  148.46  62.26 

United  Kingdom    11,093,469  966,854,253  87.15  22.82 

British  colonies   not   elsewhere 

ted     354,275  32,936,217  92.97  2.78 

Total    75,334.398     $7,609,706,491     $101.01     $11.00 

United   States    7,305,443  3.060,178,611        418.89       37.38 

Grand  total    82,639,841      $10,669,885,102 

Not  included  in  the  total. 

It  i^  interesting  to  note  that  in  Europe,  and  even  in  Canada,  the  functions 
of  the  government  in  this  field  arc  larger  than  in  this  country  where  the  state 


WHO   OWNS    THE    UNITED   STATES?  57 

restricts  itself  merely  to  formulating  the  general  legislation  pertaining  to  the 
subject,  sanctioning  special  charters  for  the  creation  of  savings  banks,  and 
controlling  through  special  officers  the  workings  of  these  institutions.  Euro- 
pean governments  in  many  cases  have  shown  greater  interest  in  this  mode  of 
popular  savings,  either  by  guaranteeing  the  safety  of  deposits  or  by  instituting 
government  institutions,  chiefly  postal  savings  banks  for  the  receiving  and 
managing  of  savings  deposits.  In  some  countries,  such  as  Russia,  Bulgaria 
and  Roumania,  the  lack  of  private  initiative  and  the  preponderating  influence 
of  the  state  in  the  entire  economic  life  of  the  nation  have  caused  the  develop- 
ment of  public  savings  banks  to  an  almost  exclusive  extent.  In  other  coun- 
tries, such  as  Germany,  Switzerland  and  France,  the  local  public  bodies,  such 
as  the  communes  or  cantons,  from  the  very  outset  invited  and  fostered  the 
deposits  of  small  savings  by  establishing  municipal  savings  institutions.  Wher- 
ever the  central  government  is  in  immediate,  though  not  exclusive,  charge  of 
the  savings  service,  as  in  the  United  Kingdom,  Belgium  and  Russia,  parts  of 
the  deposits  aic  invested  in  government  securities,  so  that  the  public  savings 
institutions  there  serve  the  double  purpose  of  providing  a  safe  investment  for 
tin  capital  of  the  less-well-to-do  and  commercially  inexperienced  class  of  the 
population,  as  well  as  of  strengthening  the  public  credit  of  the  country  by 
attracting  investments  on  the  part  of  such  classes  which  left  to  their  own 
initiative  might  not  choose  this,  or  for  that  matter,  any  other  mode  of  invest- 
ment. 

The  common  feature  of  all  savings  banks,  no  matter  how  organized,  is 
that  they  are  not  working  for  profit,  the  underlying  idea  being  to  make  the 
deposits  as  secure  as  possible.  This  results  naturally  in  an  interest  rate  on 
deposits  considerably  below  the  normal  commercial  rates  prevailing  in  the 
respective  countries.  The  figures  shown  in  the  foregoing  table  reveal  different 
degrees  of  what  might  be  termed  the  "saving  capacity"  of  the  different  nations. 

though  it  always  should  be  borne  in  mind  that  the  amounts  deposited  with 
savings  banks  by  no  means  represent  the  only  savings  of  a  nation.  Another 
factor  which  makes  comparisons  difficult  is  the  fact  that  apart  from  differences 

in     legislation     leaving    to    these    institutions    a    greater    or    smaller    latitude    or 

fie, (loni  of  investment,  the  regulations  regarding  tin-  maximum  amounts  which 

may    be   credited    to   one   individual    vary    according   to   country,   and    that    there 

lure  the  average  size  of  the  savings  deposit  casts  but  little  light  on  the  general 
prosperity  of  the-  people  and  the  more  or  less  equitable  distribution  of  wealth 
among   them. 

The  general  social  conditions  of  a  country,  the  spread  of  general  educa 


58  WHO   OWNS    THE    UNITED    STATES? 

tiou  and  "banking"  habits  among  the  masses,  existing  facilities  of  communica- 
tion, the  ease  and  lack  of  formalities  with  which  savings  are  made  and,  last,  hut 
not  least,  the  use  made  hv  the  population  of  other  modes  of  saving — all  these 
factors  have  to  be  considered  when  international  comparisons  of  savings  statis- 
tics are  attempted.  To  give  but  a  few  examples:  The  total  savings  deposits 
of  Prance,  as  already  seen,  appear  less  than  those  of  Austria,  while  the  aggre- 
gate  savings  deposits  of  Prussia  are  shown  to  exceed  those  of  France  by  almost 
eighty  per  cent.  In  France  savings  deposits  constitute  but  a  part,  and  by  no 
means  the  larger  part,  of  the  total  savings  of  the  nation.  As  a  matter  of 
fait,  the  investments  of  the  French  people  in  Russian  public  bonds  during  the 
most  recent  period  only,  not  to  mention  the  holdings  of  the  enormous  national 
debt  at  home,  according  to  most  conservative  estimates,  exceed  by  far  the 
amounts  deposited  in  national  savings  institutions.  In  the  case  of  Austria, 
the  figures  furnished  here  are  somewhat  misleading,  since  the  postal  savings 
banks  of  that  country  are  engaged  in  the  general  banking  business  and  the 
amounts  reported  as  ordinary  deposits  exceed  those  reported  under  the  head  of 
savings. 

droit  Tower  of  Trust  Companies. 

Aside  from  national  banks,  state  banks  and  private  banks,  the  trust  com- 
panies of  the  country  form  one  of  the  great  financial  powers,  and,  indeed,  are 
part  of  the  great  power  called  the  "Money  Trust."  They  are  not  what  is 
known  technically  as  a  trust  or  monopoly,  but  their  name  signifies  their  char- 
acter.     They  are  in  a  sense  hanks  which  act  as  trustees  under  special  laws. 

Their  power,  because  of  the  great  amount  of  money  they  handle,  is  very 

.t.  There  are  more  than  1,000  trust  companies  in  the  United  States.  So 
rapid  has  been  the  development  of  the  trust  companies  in  the  last  few  years, 
and  so  largely  have  they  become  competitors  of  the  banks  and  great  factors 
in  the  money  market  that  there  is  need  of  more  knowledge  concerning  them. 
In  the  year  from  June  30,  1903,  to  June  30,  1904,  the  increase  in  the  num- 
ber of  trust  companies  was  over  400.  Of  958  companies  of  which  accurate 
account  can  be  had  the  largest  number  is  in  Pennsylvania,  where  there  are  180. 
V  York  follows  next  with  eighty,  and  the  eighty  companies  have  resources 
much  greater  than  those  of  any  other  state.  New  Jersey  stands  third,  Indiana 
fourth.  Ohio  fifth  and  Illinois  sixth,  the  last   named  having  forty-two. 

There  .ire  trust  companies  in  every  one  of  the  states  and  territories  and  in 
the  District  of  Columbia  and  Hawaii.  In  numbers  the  trust  companies  have 
grown  more   rapidly   since  1899  than   have  the  hanks,  although  there  has  been 


WHO   OWNS    THE    UNITED   STATES?  59 

a  remarkable  development  in  the  latter,  due  to  the  enactment  of  the  law  of 
.March,  1900.  which  provided  for  the  incorporation  of  institutions  of  small 
capital.  Since  1899  the  number  of  trust  companies  has  increased  151  per  cent, 
while  the  number  of  national  banks  has  increased  49  per  cent.  In  total 
resources  the  aggregate  of  these  958  trust  companies  is  more  than  $3,000,000,- 
000,  an  increase  since  1899  of  more  than  200  per  cent. 

The  character  of  the  business  of  trust  companies  differs  widely.  In  some 
states  they  are  closely  connected  with  savings  institutions  and  state  banks,  as 
in  Illinois.  Elsewhere  they  may  have  a  business  in  life  insurance.  Primarily 
they  were  formed  to  act,  as  we  have  said,  as  a  trustee.  It  is  noticeable,  how- 
ever, that  more  and  more  they  are  enlarging  the  scope  of  their  operations  so 
as  to  include  every  kind  of  banking,  following  the  tendency  of  the  times  toward 
"department  store  methods."  Sometimes  they  find  the  easiest  pathway  to 
profits  in  buying  and  selling  real  estate  and  promoting  real  estate  schemes. 
Actually  tiny  thus  may  become  real  estate  companies  with  banking  branches. 
This  kind  of  business  could  not  be  done  by  a  national  bank  for  it  would  be 
against  the  federal  law.  Others  become  fidelity  companies,  guaranteeing  the 
bonds  of  individuals  and  enterprises.  Funds  placed  on  deposit  in  such  compan- 
i<  -.  or  held  by  them  in  trust,  are  subject  to  such  heavy  risks  as  fluctuations  in 
nal  estate  values,  disastrous  fires  or  unreliability  on  the  part  of  bonded  custom- 
i  re.  Tin-  commercial  banking  end  of  trust  companies  is  the  more  common,  but 
frequently  it  is  more  hazardous  than  national  banking  because  of  the  smaller 
cash  reserves  that  are  usually  held  than  those  of  national  banks.  Such  com- 
panies besides  discounting  commercial  paper,  etc..  frequently  embark  upon 
.stock  speculation-  that  is,  they  often  join  syndicates  to  buy  and  sell  stocks 
and  bonds,  and  sometimes  big  failures  have  resulted   from  this  sort   of  financing. 

Sometimes  trust  companies  branch  out  into  the  most  extensive  kind  of 
commercial  and  even  international  banking.  For  instance  one  has  developed  a 
business,  when  such  a  thing  is  possible,  in  shipping  gold,  a  function  heretofore 
performed  by  banks  and   private  banking  (inns. 

Tn   diou    tin     relative    power   of   the   trust    companies   compared    with    that    ol 

the  hitler  known  form  «>l  national  banks  we  give  the  following  statement  of 
resources  of  958  trust  companies  and  5,331   national  banks  in  dune,  1904: 

Total  resources.    Average  each. 
Trust    companies..  .$3,188,375,397       $3,120,000 
National   hanks....    6,655,988,686         1,250,000 

This  shows  that  while  there  are  over  five  limes  as  man)  national  banks  as 
trusl  companies  in  the  United  States,  tin    trust  companies  have  about   half  the 


"THE    HOME    OF   THE    TRUSTS." 

This  is  a  photographic  reproduction  of  the  name-plate  in  the  office  building  occupied 
by  "The  Corporation  Trust  Company  of  New  Jersey,"  al  Trenton,  the  capital  of  the  state. 
This    company    claims    more   than    1,200    "principal    offices"    of   corporations    of    other   states 

with  a  capitalization  of  close  to  four  billion  dollars.  Stockholders  meetings  must  be 
held  within  the  state — hence  all  these  offices.  When  you  consider  that  the  state  chartered 
nearly  10,000  corporations  between  1*'><>  and  1902,  you  can  imagine  why  the  claim  is  made 
that    New   Jersey   is   selling   out    the    rest  of   us. 

Almost  the  entire  history  of  the  organizing  of  great  corporations  is  one  of  commercial 
and  political  corruption.  The  state  of  New  Jersey  issues  charters  to  the  trusts.  The  laws 
of  the  state  are  so  framed  that  the  citizens  pay  no  state  tax,  directly.  The  income  derived 
from  the  corporations  more  than  pays  the  expenses  of  the  state  government.  Mr.  Lincoln 
Steffens,  of  the  editorial  staff  of  McClure's  Magazine — who  has  been  Investigating  commercial 
and  financial  problems — terms  New  Jersey  as  "a  traitor  state,"  and  adds:  "Jersey  shows, 
plainer  than  any  other  state  or  city,  how  we  are  all  betraying  one  another,  and  that  what 
we  Americans  lack  is  representative  government — not  good  government,  not  privileges,  not 
advantages  over  one  another,  but  FA  I  It   PI. AY  all  around,  and   before  the  law,  equality." 


WHO   OWNS    THE    UNITED    STATES?  61 

resources  and  the  average  resources  of  the  trust  companies  are  over  twice  as 
great  as  those  of  the  national  banks. 

To  show  the  growth  of  trust  company  financial  power  we  submit  the  fol- 
lowing statement  of  resources  and  number  of  companies  in  recent  years: 

Number  of  Companies.   Total  Resources. 

1904. 958  $3,188,375,5397 

1903 531  238,554,063 

1902 4.17  1, 983,21 4,707 

1901 334  1,614,981,605 

1900 290  1,330,160,343 

1899 260  1,071,525,994 

Trust  companies  are  among  the  greatest  investors  in  stocks  and  bonds  in 
the  country.  This  is  one  reason  why  the}'  are  powerful  both  with  the  public 
and  in  the  stock  market.  Banks  which  conduct  the  usual  sort  of  business  do 
not  invest  much  in  stocks  and  bonds,  for  they  need  to  keep  their  money  in 
readiness  for  merchants  and  others  who  want  to  borrow  it  to  carry  on  other 
kinds  of  business.  This  particular  phase  of  banking  is  called  "commercial." 
The  trust  companies'  depositors  largely  are  of  a  class  who  from  time  to  time 
use  their  money  in  securities,  but  who  have  deposited  it  with  the  trust  compan- 
ies for  Bafe  keeping  and  for  interest  pending  transactions  of  their  own,  "Com- 
mercial" banks  are  criticised  for  investments  of  a  heavy  nature  in  securities, 
but  thi->  is  not  so  true  of  trust  companies,  provided  investments  are  made  with 
due  regard  to  its  deposits  and  not  for  the  purpose  of  promoting  speculative 
or  doubtful  enterprises.  It  may  be  said  that  the  more  the  trust  companies 
enter  into  competition  with  the  "commercial"  banks,  the  more  they  will  be 
obliged  to  keep  their  assets  ready  for  emergency,  and  the  less  will  they  be 
able  to  tie  them  up  in   permanent   investments. 

The  fact   thai  the  trust  companies  held  large  amounts  of  securities  during 

tin     stock    market    panic  of   1903   was   one  of   the  Causes  of  deep   concern   during 

thai   year.     With  a    few  exceptions,  however,  they  stood   the  long  liquidation 

verv    well.      The   wor->l    possible   phase  of   this   kind   of  business   is   where  the  bank 

or  trust  company  lends  heavily  to  one  borrower  or  invests  heavily  in  one  class 

of    Securities.       This    makes    it     possible    for    one    failure    to    wreck    the    institution. 

The  extent    to   which   the   trust    companies   of   the   country   are   holders  of 

stocks    and    bonds    is    but    littk     known.       A    recent    compilation    of    the    holdings 

of  securities  l>\    companies   in   fourteen   large  cities  showed   this  concentration 

of   power   to   control    nearly   $555,000,000   of  stock    and    bonds.       Even    the   three 
greatest    life    insurance    companies,    the    New     York     Life,    the    Mutual    and    the 

Equitable  Life,  together  hold  only  a  little  more  than  $100,000,000  in  excess 


WHO    OWNS    THE    UNITED    STATUS? 


of  this  amount.  They  hold  about  $658,000,000  of  stocks  and  bonds.  So 
great  indeed  is  this  power  thai  the  trust  companies  of  these  fourteen  cities  hold 
almost  as  many  stocks  and  bonds  as  those  of  all  the  national  banks  of  the 
United  States,  when  government  bonds  are  not  taken  into  consideration.  Fol- 
lowing is  a  statement  of  the  security  investments  of  the  trust  companies  of 
fourteen  large  cities  oi'  the  country: 

Greater    New    York $236,890,596 

Philadelphia    75,809.309 

Pittsburg     52,548,300 

Chicago   52,199,235 

Cleveland     25,052,151 

Boston    24,333,188 

St.    Louis    23,707,558 

Baltimore     19,232,541 

Rochester     14,858,734 

Jersey    City     7,208,515 

Buffalo    . 4,919,684 

San    Francisco     3,^.00,496 

New    Orleans     3,131,406 

Washington     1 ,793,245 

Total    $544,945,018 

The  following  comparison  shows  the  trust  company  investment  holdings  of 
fourteen  cities  and  all  the  security  investments  of  all  the  national  banks  of  the 
country,  not  including  bonds  deposited  to  secure  bank  note  circulation  and  gov- 

ernment   deposits: 

Investments  in 
Securities. 
Trust  companies  in  fourteen  cities.  .$549,945,018 
All  the  national  banks  in  the  United 

States    589,241,085 

The  following  is  a  comparative  statement  of  the  security  inyestments  of 
trust   companies  and  national  banks  of  eight  leading  cities: 

Trust    Companies.  National    Banks. 
Greater   New   York . $236,890,596     $133,816,080 

Philadelphia     75,809.369  30,042,098 

Pittsburg     52,548,300  19,059,293 

Chicago   52,199.235         13,238,840 

Cleveland     25,052,151  3,271,039 

Boston     24,333,1 88         1 1 ,724,639 

St.    Louis    23,707,558  8.662.030 

Baltimore     19,232,541  7,780,740 

Total     S509.772.93S     $227,594,759 


CHAPTER   IV 

IIOW  MANY  MILLIONS  CHANGE  HANDS— THE  CREDIT  SYSTEM. 

Small  Amount  of  Actual  Money  Needed  in  Huge  Business  Transactions — 
Ninety  Per  Cent  of  the  Business  of  the  World  Done  on  Credit — How 
Loans  Are  Made — The  Clearing  House — The  Cry  Against  Reserve  Abuses 
— Unjust  Distribution  of  Property  and  Wealth. 

When  one  considers  that  the  wealth  of  the  United  States  is  about  $110,000,- 
000,000  and  that  the  money  in  the  country  is  only  a  little  more  than  one-fortieth 
of  this  amount — less  than  $3,000,000,000 — it  seems  marvelous  that  this  amount 
should  serve  in  all  the  business  transactions  of  the  nation.  Indeed  it  is  neces- 
sary that  every  inhabitant  of  the  country  do  with  an  average  of  about  $31 
in  carrying  on  his  business.  The  fineness  and  complexity  of  the  financial 
machinery  of  the  country  is  suggested  further  when  it  is  considered  that,  with 
less  than  $3, 000, 000, 000  actual  money  in  circulation,  the  savings  deposits  of 
the  country  alone  amount  to  $3,060,000,000  and  all  the  bank  deposits  of  the 
country  amount  to  about  $10,000,000,000.  But  if  the  money  of  the  country 
i>  less  than  one-third  the  actual  bank  deposits,  let  us  look  further  and  we  shall 
see  that  in  a  year  nearly  the  whole  wealth  of  the  country  changes  hands — and 
what  with?  To  solve  the  mystery  in  one  simple  word,  it  is  not  wholly  money 
with  which  the  world  does  business  but  credit.  Indeed  more  than  5)0  per  cent 
of  the  biisine^  of  the  world   is  done  on  credit. 

It    i>  a   usual   thing  to  see   items   in   the   newspapers  speaking  of  the  •'money 

market"  or  the  rates  for  "money."     Former  Secretary  of  the  Treasury  Lyman 

.1.  Gage  coined  a  new  phrase  recently  when  he  said  this  should  l,r  changed  and 
instead  we  should  Use  the  term  "rates  fnr  credit."'  Other  authorities  have 
spoken  of  hank-  as  factories  "factories  of  credit."  Daniel  Webster  said  that 
commerce  could  not  exist  without  credit;  that  credit  was  the  vital  air  of  the 
system  and   that    it    had   done   more,   a    thousand    times,   to  enrich   the   nation    than 

all  the  mines  of  the  world.  The  tendency  of  the  times  is  for  the  volume  of 
credil  transactions  each  year  to  gro*   more  rapidlj    than  the  Bupply  of  actual 

mom  \  . 

'1     W    but     natural     to    inquire    how     this    business    is    carried    on    and     it     is 

68 


64 


HOW  MANY  MILLIONS  CHANGE  HANDS. 


explained  simply  when  it  is  said  thai  the  chief  principle  of  credit  is  collecting 
many  small  sums  which  are  not  needed  and  placing  them  where  they  are  most 
needed.  When  money  lies  idle  it  does  no  one  any  good.  If  every  one  carried 
the  average  amount  of  $81  around  in  his  pockel  the  country  would  stagnate  in 
a  very  little  time,  for  there  would  be  insufficient  money  to  make  all  transac- 
tions in  cash  and  there  would  not  be  enough  money  piled  up  any  place  to  be 
a  basis  o\'  credit.  This  leads  us  to  the  second  principle  of  credit — that  there 
always  should  he  a  liberal  amount  of  actual  money  held  in  reserve  for  emer- 
gencies. For  there  is  a  time  when  credit  becomes  strained  and  supplies  of 
actual  monev  must  be  at  hand  for  immediate  use. 

-      ..    n 


UNITED    STATES   MINT,   PHTLADEIiPHIA. 
mint  is  a  place  of  great  Interest  to  every  visitor  who  wishes  to  seo  how  money  is  made. 

Credit  today  has  reached  the  stage  where  dealing  in  it  is  a  fine  science.  In 
a  word,  tin-  business  of  credit  is  simply  that  of  lending  the  use  of  wealth. 
It  is  the  banker's  business  to  gather  this  wealth  and  to  lend  it  where  it  will  do 
the  most   good,   for  the  owner,  the  banker  and  the  borrower. 

The  banker  i-.  of  course,  or  should  he,  an  expert  in  his  science.  Occasion-, 
ally  a  hanker  may  be  a  knave,  hut  considering  all  the  amounts  of  money 
handled  each  year  by  the  men,  their  integrity  is  a  monument  to  them.  It 
would  he  impossible  even  to  attempt  to  set  forth  all  the  methods  by  which  a 
hanker  transacts  his  business  of  lending  money,  hut    a   i\\v  of  the  principles 


HOW  MANY  MILLIONS  CHANGE  HANDS.  65 

may  be  stated.  Not  only  is  it  the  privilege  of  the  banker,  but  it  is  his  duty, 
io  furnish  credit  in  the  community  in  which  he  docs  business.  The  merchant, 
farmer,  manufacturer  or  other  business  man  desires  to  embark  upon  a  certain 
line  of  activity  which  will  be  good  for  the  community,  but  lie  has  insufficient 
ready  capital.  Other  people,  perhaps,  have  more  than  they  can  use,  but  they 
may  not  be  able  to  ascertain  all  the  facts  concerning  the  nature  of  the  business 
man's  prospective  venture.  Here  comes  in  the  banker  with  his  special  training 
in  the  science  of  credits.  When  the  application  for  credit  is  made  the  banker 
at  once  must  make  up  his  mind  on  this  question:  Has  he  the  ability  to  earn, 
and  will  he  pay?  It  depends  upon  the  kind  of  business  the  bank  is  in  whether 
the  loan  is  made,  some  banks  demanding  actual  security  for  loans,  others  lend- 
ing on  the  man's  "credit.'"  or  ability  and  disposition  to  pay.  Where  a  bor- 
rower is  not  well  known  he  may  be  called  upon  to  give  security  such  as  can  be 
Bold  at  once  in  case  the  loan  is  not  paid  as  agreed  upon.  Mortgage  loans, 
Becurity  collateral  loans,  bill  of  lading  loans,  etc.,  come  under  this  class  of 
CTt  dit   vending. 

How   Loans   Arc   Made. 

One  of  I  he  greatest  branches  of  hanking,  however,  is  "commercial."  This 
is  where  a  business  man  has  high  enough  standing  financially  to  "be  good"  for 
a  certain  amount.  Such  a  man  has  a  "rating"  by  which  bankers  and  other 
business  men  know  his  capacity  and  disposition  to  pay.  Thus  some  men  may  be 
in  possession  of  a  great  amount  of  wealth,  but  are  "poor  pay,"  hard  to  collect 
from:  while  others  may  be  "good  pay" — willing  to  make  good  their  debts  if  it 
t;d>es  them  their  whole  life  time,  hut  are  poor  earners.  Either  of  these  classes 
make  poor  bank  creditors.  In  the  bank  doing  a  general  business  the  first  man 
probably  would  be  mad.  to  ad\ame  a  mortgage  or  other  collateral,  SO  that  the 
banker  would  not  have  to  be  put  to  the  trouble  of  suing  to  recover  the  amount 
of  the  loan  when  it  fell  due.  [n  "commercial''  hanking  much  of  the  business  is 
done  on  simply  promissory  notes  with  no  assets  put  up  for  security.  Some 
times  the  note  i, hi. I  have  an  endorser  one  who  will  stand  good  for  the  loan 
it'  the  borrower  does  not  pay  when  due.  Where  there  is  no  such  endorsement 
Hie    note    is   called    "one    name    paper;"    where    there    is    one   endorser    it    is   called 

"tu"  name  paper,"  etc.  In  determining  on  the  extension  of  credit  to  a  pros 
pective  borrower  the  banker  who  lends  on  commercial  paper  considers  the  appli- 
cant   in  this  wise: 

Honesty:  the  borrower  musl  be  trustworthy  beyond  doubt. 

Business  ability:  as  honesty  without  business  ability    !--  useless  commercially 

tin     mat  I.  r  must  be  considered. 


66  HOW  MANY  MILLIONS  CHANGE  HANDS. 

Business  experience:  the  banker  musl  judge  what  risk  there  is  in  relying 
upon  the  ability  and  reputation  of  the  borrower  to  do  what  he  thinks  he  can 
do,  and  past  history  of  the  borrower  is  the  guide. 

Hank's  previous  experience:  it  the  man  who  solicits  the  loan  has  failed,  it. 
almost  always  bars  him  from  receiving  new  credit. 

Condition  of  business:  a  man's  present  status  reflects  his  ability  and  there 
fore  is  a  guide. 

Resources:  it'  these  are  not  put  up  as  collateral  security  tor  the  loan  they 
are  of  >mall  importance,  though  of  course  they  help  to  gauge  the  borrower's 
ability. 

People  who  do  not  come  in  touch  with  great  financial  transactions  marvel 
at  s,)mr  of  the  methods  of  Wall  street  and  other  hankers.  In  courts  of  law, 
juries  and  often  the  judges  do  not  understand  processes  that  are  very  simple 
and  clear  to  the  hanker.  For  instance,  in  a  recent  report  of  a  hearing  in  bank- 
ruptcy the  following  statement  is  found:  "That  hanks  loan  hundreds  of  thou- 
sands of  dollars  to  customers  without  any  other  security  than  the  good  credit, 
of  the  brokers  desiring  the  loan,"  was  the  cool  admission  made  by  a  witness 
in  the  hearing.  It  appeared  from  the  testimony  that  a  well  known  Wall  Street 
hank  had  been  lending  a  firm  of  stock  brokers  about  $1()(),0()()  every  day  with- 
out security  and  without  interest  To  the  layman  this  seems  a  marvelous  opera- 
tion in  finance.  To  Wall  Street,  however,  there  is  nothing  strange  or  startling 
about  such  a  transaction.  It  was  simply  every-day  business  between  bank  and 
broker.  In  such  dealings  the  broker  agrees  to  keep  a  certain  daily  balance 
d<  posited  with  the  bank.  The  bank  in  return  agrees  to  give  the  broker  a  daily 
loan  of  a  certain  amount,  this  loan  being  credited  to  the  broker's  balance  and 
upon  this  he  can  draw  checks  in  payment  of  securities  which  he  may  buy 
during  the  day.  The  broker's  account  is  closed  and  balanced  each  day,  and 
each  day  his  agreed  balance  must  be  made  good.  The  broker  gains  by  being 
able  to  have  his  ducks  promptly  certified.  The  bank  gains  by  obtaining  the 
use  of  the  broker's  daily  balance  with  which  it  can  make  profitable  loans. 
Practically  tin-  bank  buys  the  deposits  of  the  broker  by  giving  him  certain 
facilities  u hich  In  needs  in  his  business.  The  fact  that  no  security  is  required 
for  such   loans  other  than  the  firm's  note  is  not  unusual.      There  can  be  no  bet- 

security  ordinarily  than  the  good  name  of  a  firm  doing  an  active  and  legiti- 
mate business.  Tin-  fact  that  no  interest  was  required  is  not  surprising  in  view 
of  the  fact  that  in  return  for  these  facilities  the  bank  obtained  continuous  use 
of  the  broker's  balance  without  interest. 


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lis  HOW    MAN1     MILLIONS  CHANGE  HANDS. 

It  is  l>ut  aatura]  when  one  considers  the  size  of  the  credit  transactions  of 
the  country  or  the  world  that  doubl  should  arise  over  the  freedom  of  this  busi 
m>s  from  fraud.  It  will  be  found  upon  examination,  however,  that  not  only  in 
banking,  hut  in  general  business,  credit  is  extended  very  liberally  and  gener- 
ally. It  !•-  estimated  that  in  the  sale  of  merchandise  alone  credit  is  extended 
h\  business  men  to  the  amount  of  $70,000,000  and  so  careful  are  merchants 
in  this  line  of  business  that   losses  average  only  about  1  '  i   per  cent. 

The  ( 'learmg  House. 

Oih   of  the  greatest  -factors  tor  extending  business  today  is  the  bank  check 

method.  Time  was  when  every  man  saved  his  own  money  and  paid  in  currency. 
As  has  been  shown  in  the  foregoing,  such  a  thing  would  he  impossible  today. 
It  is  altogether  probable  that  had  not  the  system  heen  invented  by  which  money 
could  be  deposited  in  a  hank  and  he  drawn  against  by  check,  business  would  not 
have  gone  forward  by  the  great  leaps  and  hounds  with  which  we  are  familiar. 
Then  was  a  time  even  when  every  checking  transaction  necessitated  the  use  of 
money.  When  the  check  was  paid,  money  had  to  be  handed  oyer  by  the  hank 
Unless  the  cheek   was  deposited   hack   in  the  same   institution. 

Soon,  however,  there  developed  a  system  by  which  this  was  almost  entirely 
done  away  with.  This  was  the  method  called  clearing.  In  most  of  the  prin- 
cipal cities  there  are  associations  of  the  hanks  called  "clearing  houses. "  At 
_  Jar  intervals  clerks  from  each  hank  in  the  association  meet  at  the  clearing 
house  with  all  the  cheeks  the  hank  has  received  against  other  banks  in  the  asso- 
ciation. Hv  an  ingenious  method  the  checks  are  passed  around  to  the  debit 
banks  so  that  a  great  many  will  cancel  each  other.  That  is,  one  bank  may 
have  received  clucks  drawn  against  each  of  three  other  banks,  and  in  turn  the 
three  other  banks  may  have  received  checks  drawn  against  the  first  named  bank. 
It'  these  checks  happened  to  be  for  the  same  amounts  they  would  cancel  each 
other.  No  money  would  change  hands,  yet  the  transactions  in  business  for 
which  the  check  payments  were  made  would  have  been  effected  just  as  well  as 
if  actual  money  had  been  used.  When  many  banks  are  members  of  a  clearing 
house  and  the  transactions  are  very  intricate  nearly  every  bank  has  to  pay  or 
ive  a  balance  in  currency  because  the  checks  will  not  cancel  against  each 
otlnr.  It  is  usually  the  case,  however,  that  enormous  business  can  be  done 
with  little  money.  For  instance,  in  1901,  the  New  York  Clearing  House 
mounted  to  $77,020,672,493  and  the  actual  cash  balances  paid  to 
transact     thi~     enormous     volume     of     business     were     only     $3,315,037,741. 


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HOW  M  i\)    MILLIONS  CHANGE  HANDS. 

I     -        ins  that  nearlj   $1  1,000,000,000  in  one  year  was  done  without  actual 

in  fact  l>\   mere  credit  and  bookkeeping.     This  method  is  such  a  labor- 

levice  that   in  cur  day,  May   10,  1901,  after  the  celebrated   Northern 

r      6c  panic  on  the  New  York  Stock  Exchange,  the  New  York  Clearing  House 

7,490  in  business  with  only  $23,873,115.     One  day  in  May,  11)02, 

the  Chatham  Hank  o(  New    York  settled  exchanges  amounting  to  $1,323,694 

with  an  actual  cash  transfer  of  only  ten  cents.     An  average  number  of  checks 

d  daily  through  the  New   York  Clearing  House  is  about   500,000.     That 

it  would  be  impossible  to  carry  on  modern  business  now   without   the  machinery 

of  tin    clearing  house  system   is  an   undisputed   fact. 

It  seems  probable  that  the  present  banking  system  is  here  to  stay,  for  busi- 
ness in  the  use  of  checks  and  clearings  is  increasing  everywhere.  In  the  year 
1904  the  clearings  of  the  London  Clearing  House  increased  more  than  $2,000,- 
(init. ooo  over  the  year  1903.  This  was  due  principally,  according  to  compe- 
tent authorities,  because  the  public  lias  recognized  the  greater  safety  and 
facility  afforded  by  the  l>ank->  for  people  of  even  small  means.  In  New  York 
the  hank  exchanges  from  1900  to  1904  increased  $16,000,000,000. 

National   Banking  System. 

Tin-  National  Banking  System  of  the  United  States  is  one  of  the  great  cogs 
in   the   credit    machinery   of   tin    country.      It   is   based   on   the   old   principle  of 
using  idle  funds  where  they  will  do  the  most  good  in  business.     It  is  compara- 
tively easy  to  organize  a  national  hank,  any  set  of  men  having  $25,000  capital 
g  able  to  start  one  in  a  town  of  not  more  than  3,000  inhabitants.     Where 
then    an    not    more  than  6,000   inhabitants  $50,000  capital   is  needed;  50,000 
inhabitants   need   $100,000  and   over  that   $200,000  or   more  may  be  used  as 
Permission  i^  granted  by  the  government  on  application  of  five  indi- 
viduals, corporations  or  firms  or  associations  not  being  eligible.     One-half  of 
■  1  capita]   -lock   musl   he   paid   in   in  cash  before  the  government  will 
certificate  of  organization.     Promissory  notes  will  not  do.     As  soon  as 
tificate   is   issued    preparation   must   be  made  to  pay   in  the  rest  of  the 
.   this   balance   being  due   in    not    more  th;uu   five   installments  of  10   per 
';.  one  at  the  end  of  each  thirty  days  after  grant  of  authority  to  begin 

issui  d. 

ry  national  bank  must  keep  on  deposit  with  the  United  States  treasurer 

earing  government  bonds  to  protect  depositors.     The  necessary  amount 

'■    of  Si  50.000  capital  or  less  is  one-fourth  of  the  amount  of 

tip  .   while   for  capital  over  that  amount  the  minimum  is  $50,000.     It 


HOW  MANY  MILLIONS  CHANGE  HANDS.  71 

is  accessary  that  at  least  three-fourths  of  the  directors  of  the  hank  shall  reside 
in  the  state  or  territory  where  the  bank  is  located.  Any  stockholder  who  is  a 
citizen  of  the  United  States  owning  ten  shares  or  more  of  stock  is  eligible  as  a 
director,  provided  the  stock  is  not  incumbered. 

One  of  the  chief  privileges  of  a  national  bank  is  to  receive  deposits  of  the 
government  funds  not  held  in  Washington  and  to  issue  bank  circulation  or 
bank  notes.  Both  the  privileges  are  safeguarded  by  deposits  of  government  or 
other  approved  bonds  with  the  government  at  Washington.  Every  national 
bank  may  issue  circulation  to  the  amount  of  its  paid-in  capital.  The  amount 
of  bonds  to  secure  this  circulation  (and  these  bonds  must  be  United  States  Gov- 
ernment bonds)  must  be  equal  to  the  face  value  of  the  amount  of  notes  issued. 
This  deposit  of  bonds  is  in  order  to  insure  payment  of  the  notes  on  demand. 
If  a  bank  fails  to  redeem  any,  the  Comptroller  of  Currency  is  empowered  to 
appoint  a  receiver  to  sell  the  bonds  and  redeem  the  bank's  outstanding  circula- 
tion. A  national  bank  note  is  not  legal  tender,  is  not  receivable  for  customs 
duties,  is  not  good  tender  for  payment  of  interest  on  the  national  debt  and  is 
not  counted  in  the  reserve  of  a  national  bank.  Otherwise  national  bank  notes 
serve  as  ordinary  money.  The  profit  in  a  national  bank  issuing  bank  circula- 
tion is  in  the  difference  between  the  amount  of  interest  it  can  earn  by  lending 
this  money  out  in  the  credit  market  and  the  cost  of  the  bonds,  interest,  etc. 
The  same  holds  true  in  banks  having  on  deposit,  secured  by  government  or 
approved  bonds,  funds  of  the  nation.  The  reason  that  the  government  has 
money  in  the  national  banks  at  all  is  that  it  is  not  good  to  horde  money  in  the 
Treasury  at  Washington.  Money  is  made  for  use  among  the  people  and  the 
hanks  are  the  most  serviceable  agents  in  getting  this  money  back  into  circula 
tion.  Hanks  that  put  up  bonds  and  secure  such  government  funds  are  called 
( lovernmenl    Depositories. 

One  of  the  principal  regulations  of  the  national  banking  act  is  that  pro- 
vision by  which  a  reserve  fund  shall  be  kept  on  hand  in  order  to  proted  depos 
itors  who  need  to  draw  out  their  money.  It  is  of  course,  as  has  been  pointed 
out,  the  province  of  a  bank  to  collect  deposits  and  to  lend  them.  It  has  been 
found  that  of  the  million^  of  money  changing  hands  much  of  it  is  in  credit  and 
not  actual  money,  yet  all  these  transactions  are  done  in  the  faith  that  the 
money  i>  there  if  needed.  It  is  also  found  that  the  amount  necessary  to  saf< 
guard  the  depositors,  save  in  times  of  panic,  is  very  small. 

The  law    provides  thai   in  the  country  hanks  a  reserve  of  only  15  per  cent 

,lll|st    '"•   held,  and   only    two-fifths   of   this   need   be   kept    in   their   own    vaults,   the 

remainder  being   privileged   to  go  to  banks   in  a   Reserve  City   or  a   Central 


HOW     w  i.\  )    MILLIONS  CHANGE  HANDS. 

i;   ,  m   City.     Central  Reserve  Banks  musi  keep  25  per  cent  of  the  net  depos- 
m   hand   in   their  own   vaults.      Reserve   Hanks   musi    have  25   per  cent    in 
m   imt  tlu\   have  the  privilege  of  depositing  one-half  of  this  with  a  bank 
in   a    Central    Reserve   City.      The   Central    Reserve   Cities   are   Chicago,    New 
York  and  St.   Louis.     The  Reserve  Cities  arc:     Albany,  Baltimore,  Brooklyn, 
B  ston,    Cincinnati,    Cleveland,    Columbus,    Dallas,    Des    Moines,    Denver,    De- 
troit.   Dubuque,    Houston.      [ndianapolis,    Kansas    City,    Kan.;    Kansas    City, 
Mo.,  Lincoln,  Los  Angeles,  Louisville,  .Milwaukee,  .Minneapolis,   New  Orleans, 
ia,  Philadelphia,  Pittsburg,  Portland,  St.  Joseph,  St.  Paul,  San  Francisco, 
innah  and  Washington. 

Cry  Against  Reserve  Abuses. 

The  national  banking  system  often  is  not  understood  because  of  some  of 
its  complexities.  There  lias  been  a  good  deal  of  critic-ism  against  it  by  malevo- 
lent persons  who  have  charged  that  the  government  should  not  favor  the 
national  banks.  It  remains  -i  fact,  however,  that  very  little  money  is  lost 
through  the  failure  of  national  banks,  either  through  swindle  or  through 
l)id  business  judgment.  A  system  of  handling  the  great  credits  is 
ssary  and  as  yet  the  lawmakers  of  the  country  have  devised  no  better 
method. 

One  thing  against   which  critics  have  railed  most   is  the  "pyramiding"  of 

rves.      We   have  seen   how    a  country   national   bank   may    lend  all   but   15   per 

of  iN  deposits.     Even  three-fifths  of  this  can  go  to  an  approved  agent  in 

I;  -  (  ity.     \<>u   the  bank  in  the  Reserve  City  may  lend  out  the  greater 

part    of  this   reserve  of   the  country   bank,   because   it   itself,   needs  to   keep  only 

25  per  cent  reserve  on  all  deposits  of  all  and  even  half  of  this  may  be  sent  to 

'     ntral   Reserve   bank.     What    is  the   result?     Wall   Street  banks,  being  the 

largest   and   most    powerful  and   in  the  most   influential  of  the  Central   Reserve 

ittract    balances   from   almost   every   bank   in   the  country.      It   is  often 

--.ir\    for    banks    in    other   cities    to   do   business    with    New    York    and    there- 

sier    to    have    money    on    deposit    there.      The    huge    banks    of   Wall 

onstantly  offer  inducements  to  banks  of  interior  cities  to  deposit  with 

1       •■"   the   reservt     provision   of   the    National    Banking   Act    it    will    be 

hat    r  .    jupposed    to   be   held    intact    to   support    deposits,  drift    to   the 

Res  or  t  entral   Reserve  Cities  and  are  loaned  out  to  within  a   very  small 

nal    percentage.     Critics  of  the  system  say   that   while  the 

for  reserves  is  kept  out  of  local  circulation,  the  method  of  per- 

-   to  deposit    portions   of   the   reserve   with   banks   of  other   cities 


HOW  MANY  MILLIONS  CHANGE  HANDS. 


73 


serves  to  give  \Y;ill  Street  the  benefit  of  millions  of  dollars  to  lend  out  which 
really  are  supposed  to  be  held  as  reserves.  To  show  how  this  works  it  may  be 
said  that  in  the  year  1904  the  lawful  money  reserves  of  all  the  national  banks 
of  the  country  increased  $55,000,000.  The  gain  in  lawful  money  reserves  of 
the  national  hanks  of  New  York  City  during  the  same  time  was  $24,000,000. 
To  bring  it  down  to  a  more  centralized  comparison,  the  gain  in  lawful  money 
reserves  of  the  four  great  national  banks  of  New  York — the  National  City,  the 
National  Bank  of  Commerce,  the  First  National  and  the  Chase  National  banks 
— in  the  same  period  was  .S°,(),(j()(), ()()().  Tims  85  per  cent,  of  the  gain  of 
reserves  of  New  York  City  and  !>S  per  cent  of  the  entire  cash  gain  of  all  the 


HAULING    INGOTS    OF    SILVER    BULLION    IN    THE    PHILADELPHIA    MINT. 

national  banks  of  the  United  Stales  were  by  these  four  banks.  As  yel  no 
serious  accidenl  has  resulted  from  llii->  concent  ration  of  national  banking 
reserves  in  New   York  to  be  lent  out   for  the  benefit  of  big  financiers,  for  it  has 

been    found    that,   except    where    fright    occurs,   a    very    small    amount    of    reserve 

is  necessary.  It  is  generally  the  case  that  if  mone}  is  needed  badly  in  one 
place  if  can  be  drawn  readily  from  the  bank  where  the  reserve  has  been  depos 

lied.  II  is  Only  where  1 1 1 ;  1 1 1  \  people  and  mall\  ei  HillllU  II 1 1  les  are  disturbed  at  one 
tin:'     thai    withdrawals   are   general.      Then    withdrawals   may    strain   credil    so   I  h.it 

some!  ones  panics  ensue. 

When  disturbance  arises   in   the  money   markel    the  (zovernment,  because   it 


HOW  MANY  MILLIONS  CHANGE  HANDS. 

is  responsible  in  a  great  degree  for  the  banking  methods  of  the  country,  fre- 
quentlj   comes  to  the  aid  of  the  financiers.     This  is  done  in  several  ways,  but 
all  methods  Lead  to  a  release  of  money  held  in  the  vaults  of  the  National  Treas- 
ure so  that  the  people  will  have  the  use  of  it.     One  way  has  been  to  purchase 
mmenl  bonds  to  retire  them  from  circulation.     This  is  done  by  the  Secre- 
tin: Treasury  calling  in  the  bonds  at  a  given  price.     It'  the  money  is 
badl)    needed  the  bankers  will  buy  up  a  lot  of  the  bonds  and  exchange  them 
lor   cash,    which    in    turn    can    he   lent    out    where    it    will    do   the   most   good    to 
ral   business.      Another  method   often   used   is   to  deposit    a   large  amount    of 
money    in   the   aggregate  among  a   number   of   national   hanks  on   government 
bond  security.     In  the  fall  when  the  farmer  needs  money  to  move  his  crops  this 
customary    method.      Then   the   government   does   not    send    the   money   to 
W    ".   Street   or  to  the  big  reserve  centers,  hut   directly  to  the  small  banks   in 
the  agricultural  districts.     Not  only  does  this  frequently  check  great  uneasiness, 
hut  naturally  it  helps,  by  restoring  confidence,  to  keep  money  rates  down  to  a 
normal   level   where   the  average  business  man   will  be  able  to  get   accommoda- 
tion^ without  being  cramped  to  pay   for  them. 

\  re   criticism  has  arisen   against  the   method   of  depositing 

reserves   in   Central   Reserve  Cities  to  the  degree  that   permits  Wall   Street  to 
profit  more  than  any  one  else.     One  critic  recently  said: 

"Money  in  circulation  was  below  *14  per  head  of  35,000,000  population  at 
the  close  of  the  civil  war,  in  1865,  but  is  now  over  $30  per  head  of  80,000.000 
population.  The  natural  flow  of  so  great  an  increase  should  have  furnished 
the  only  source  of  supply  to  the  money  market.  These  malign  permissions 
thus  by  indirection  override  natural  demand  and  supply  and  constitute  a  prefer- 
in  law  for  the  use  of  money  and  credits  based  thereon.  No  law  could  be 
i  to  directly  accomplish  this  end.  Wall  Street  gets  the  lion's  share  and 
by  •  as  has  tin   country  at  its  mercy,  through  capitalistic  juggles.     Hun- 

dnd-  of  millions  of  dollars  of  loans, — not  in  national  banks  only, — have  grown 
from  the  reserve  there  disbursed,  and  without  which  the  great  "watered"  capi- 
ould  not  have  been  "floated."  which  oftentimes  tax  the  very  necessa- 
irn   dividends  on   the  "water." 
"Artificial    persons    (corporations)    or   those    who   control    them   have    thus 
preyed  upon  the  people  by  method-  which  natural   persons,  however  numerously 
ted,  can  never  collectively  exercise,  and  made  the  creator  secondary  and 
tributary  to  the  creature.     The  permissions  have  converted  the  plain  demand 
very  opposite,  and  instead  of  the  reserve  being  faithfully  held 
only  justifiable  purpose  of  law  in  compelling  the  money  to  be  with- 


HOW  MANY  MILLIONS  CHANGE  HANDS.  75 

held  from  local  public  use,  viz. :  to  protect  depositor*,  they  are  made  a  tender 
for  speculative  money  supply,  and  basis  for  illegitimate  ventures.  Money  is  the 
life  blood  of  all  undertakings,  and  the  measure  of  all  values.  Labor,  industry. 
and  property  arc  all  gauged  thereby.  It  should  therefore  circulate  without 
favor  or  impediment  of  law. 

"President  Roosevelt  advocates  'a  square  deal  for  every  man,  no  less,  no 
more.'  How  is  a  square  deal  possible  under  these  permissions  of  law?  Again 
he  says,  'Ours  is  not  a  government  which  recognizes  classes.'  That  in  a  sense 
is  true,  but  had  he  said,  'Ours  is  not  a  government  which  creates  classes,'  it 
would  not  be  true.  This  great  monetary  discrimination  creates  an  on-Ameri- 
can favored  class,  and  provides  for  the  already  rich  a  special  path  to  greater 
fortunes.  Means,  opportunity  and  incitement,  have  been  thereby  provided  for 
people  of  small  means  to  risk  their  all  on  narrow  margins,  and  for  the  already 
rich  to  exploit  the  great  industries  and  products  of  the  country  by  trusts,  com- 
bines, corners,  and  false  capitalizations,  for  their  further  enrichment. 

"National  laze  which  thus  enables  unjust  distribution  of  money,  thereby 
enables  unjust  distribution  of  property  and  wealth.  If  the  reserves  now  with- 
held arc  too  great  to  be  everywhere  kept  intact  in  money  for  security  of  depos- 
itors, let  the  required  percentage  be  reduced.  Rich  indeed  is  our  country,  and 
gnat  its  seeming  prosperity.  But  multi-millionaires,  and  their  colossal  for- 
tunes acquired  as  by  a  magician's  wand,  attest  unjust  law  to  be  their  founda- 
tion. Belief  in  the  goodness  and  Fatherhood  of  God  forbids  the  idea  that  lb' 
creates  men  with  such  disparity  of  brains. 

"In  vain  will  righteousness  and  justice  between  man  and  man  be  inculcated, 
so  long  as  this  root  of  unrighteousness  and  ///justice  imbedded  in  law.  continues 
to  widen  disparities  and  ripen  its  fruits  of  prodigal  wealth  and  luxury  on  the 
One  hand  and   hardening  conditions  of  living  and    progress   in    the   world   on    the 

other.     Substantia]  repeal  of  the  permissions  was  recommended  by  Comptroller 

Dawefl  in  his  annual  report  December,  1<)()(),  to  Congress,  in  which  he  discussed 
the    danger,    which    had    made    itself    apparent    years    before,    of    continuing    the 

practice.     Even  a  gradual  repeal,  first   making  it  apply  only  to  Philadelphia 

and  Boston  banks,  would  probably  distress  Wall  Sheet.  Hut  there  is  a  con 
Bideration  more  important  t<»  the  people  <>f  this  country  than  regard  for  stimu 
lated  Wall   Street    prosperity,  viz.:   Equal   laws,  and   public    justice.     Without 

these,    liberty     itself    uill     fail." 


COMMODORE      CORNELIUS      VANDERBILT, 

Lini  h  and 
.   rbilt   Fortune. 


WILLIAM     WALDORF     ASTOR, 

Now  a  citizen  of  Greal   Britain,  but  the  richest 
owner  of  United   States  real   estate. 


WILLIAM     K.     VANDERBILT, 
I 


RUSSELL    SAGE. 
The    Famous    Financier. 


CHAPTER   V 

PERILS  THREATENED  BY   THE  MONEY   TRUST— THE  DANGER 
OF  BANK   CONCENTRATION. 

X  caring  the  Parting  of  the   Ways  in  the  Field  of  Modem  Blinking     A   Sys- 
tem  of  Federation   or  Brotherly   Alliance   a    Probability   of   the   Future 
Funs  that  Aggregation  of  Capital  May  Become  Mon    Powerful  than   the 
Government    Itself. 

It  is  generally  believed  at  the  present  time  that  the  world,  and  especially  the 
United  States,  confronts  a  great  change  in  banking.  The  banking  system  of 
the  United  States  is  based  on  the  principles  of  liberty  and  independence. 
Practically  any  one  in  this  country  can  establish  a  bank,  either  under  the 
national  or  state  law,  provided  he  lias  sufficient  capita]  and  can  comply  with 
the  other  necessary  but  moderate  requirements  of  the  laws. 

As  a  result  of  this  free  system  there  are  nearly  1  !•,()()()  banks  in  the 
country,  lint  the  independent  banks,  like  the  small  trader  in  competition 
with  the  industrial  '"trusts,"  have  learned  that  their  stability  and  business  are 
best  promoted  by  co-operation,  and  hence  there  has  developed  a  large  measure 
of  federation  between  them.  The  organization  of  clearing-houses  and  of  bank- 
ing associations  throughout  the  country  for  the  purpose  of  facilitating  busi 
ness  transactions,  and  notably  the  issuing  of  loan  certificates  by  associated 
banks  to  help  out  feeble  brother  institutions  in  time  of  panic,  have  all  been 
measures  of  alliance    for  protection  of  the  small  banks. 

Developments  which  have  resulted  in  such  marvelous  concentration  as  that 
seen  in  NV«   VTork  City  under  the  had  of  the  "Standard  oil*'  <>r  National  City 

iiank    BUggest    to    man\    observers    that    in    the    not    far  distant    future    there    will 

in  only  a  few  giant  banking  institutions  in  the  leading  cities,  with  branches 
scattered  all  oyer  the  country.  Others  believe  that  fraternal  federation  will 
result  in  the  establishment  of  an  immense  centra]  government  bank  of  reserves, 
similar  to  the  liank  of  England,  to  which  all  the  other  banks  «,f  the  United 
States  will  be  subordinate. 

[f  this  is  true,  then   we  are  near  the  parting  of  the  ways  in   the  field  <>f 
modern   banking.     On    the   one   side   there    is    independence     so   loved    by   all 


-s  PERILS   OF    THE   MONEY    TRUST. 

square  dealing;  on  the  other,  concentration.    On  the  one  side  there 
mi  of  federation  or  brothcrlv  alliance;  on  the  other  there  is  dangerous 

1     Is   plain   that   each   system   lias   its  advantages  and   its  evils;   its  points 
strength  and  its  elements  of  weakness.     Carried  up  to  a  certain  point  con- 
ration  ma\    be  economical  and  advantageous  to  the  whole  country.     It  is 
lesired  that   interest   rates  shall  not  he  so  high  when  money  is  needed  by 
the  farmer  or  planter  to  move  his  crops  or  for  the  merchant  or  manufacturer 
,ir\    on  his  business,  that  commerce  shall  suffer  by  monopoly  power. 
|)     ibtless   it    would   he  dangerous  to  put  the  money   market  of  the  country 
hi  thi'  hands  of  a   f <  u    bankers   for  good  and  all.     On  the  other  hand,  in  mod- 
ern and  improved  business,  it  is  plain  that  it  is  unwise  to  diffuse  the  power  of 
making   interest    rates   among   thousands  of  bankers,  so  that  the  borrower  of 
money  in    rexas  max    have  to  pay  as  high    as    10    per    cent,    as    has   been    the 
years,  while  New   Yorkers  could  get  loans  for  2  or  3  per  cent.     The 
chief"  danger  at    present    is  that  the  tendency  towards    concentration    will    be 
t.»o    far  and   that   it   will   put  the   credits  of  the  country  too  largely 
under    the    control    of    men    more    concerned    in    the    operations    of    the    stock 
market   and   Wall  Street   than  in  the  legitimate  commerce  of  the  country. 

only    is   the   government   exercising  a  jealous  care  over  this  tendency 
urd    absolutism    in    the    "Money    Trust,"    but   all    fair-minded    writers    and 
financial   critics  are    pointing  to   the   danger,  not  of  the  mere  growth  of  big 
hank-  in  proportion  to  the  expansion  of  the  wealth  of  the  United  States,  which 
ealthy   and   to   he  expected,  but  of  bringing  about  a  condition  where  the 
will    actually    hi-   what    some   people  think   them  to  be  already, 
Hy  all  powerful. 
BigTi   ss   alone  does   not    mean    that    the   hanking   methods  of  today  are  dan- 
B   .      5S,  in  fact   is  one  of  the  developments  of  the  age.     Not  only  in 
United   States,  hut   elsewhere,  there  are   powerful    groups  of  great   hanks 
ipidly   absorbing  each   other.      The   Deutsche   Bank   of   Berlin,    for 
.   heads   a   group  of  h.-mk-    with  $205,000,000  capital,  and   there   is   an- 
oup  in  that  city  with  $81,000,000  capital. 
1       other    countries    there    are    similar    institutions    and    groups    of   powerful 
ry   growth   speaks  an   apparent  necessity   for  expansion  in  the 
1 1  industrial  conditions.     .More  and  more,  as  great  corporations 
>lil  style,  cona  rvative,  "commercial"  banking  gives  way  to  "financial" 
d    herein    lie-    one    of    the    gravest    dangers    in    the   hanking   concen- 
tration of  i'c.  lit  history.     The  day  when  the  smaller  merchant  or  trader  bor- 


PERILS   OF    THE   MONEY    TRUST.  79 

rows  on  his  promissory  note  the  money  needed  in  his  business  is  not  wholly 
passed.      Indeed  the  greatest   corporations  still  have  access  to  the  commercial 

paper  market.  But  obviously,  with  the  growth  of  the  "trusts,"  borrowed 
money  comes  largely  from  gigantic  bond  issues  and  new  capital  from  "'watered," 
or  possibly  "unwatered,"  stock  issues. 

The  banker  who  heretofore  has  done  a  "commercial"  business — that  is, 
lends  money  to  merchants,  rather  than  backs  corporations  by  underwriting  the 
securities  or  Lending  on  them — is  the  banker  upon  whom  the  commercial  com- 
munity depends  for  aid  in  the  usual  walks  of  business  life.  It  is  not  intended 
here  to  imply  that  banks  throwing  the  weight  of  their  prestige  and  resources 
into  the  field  of  speculation,  promotion  and  investment  do  not  perform  their 
just  and  valuable  functions.  Many  a  railway  would  not  have  been  built  bad 
not   banking   interests  come  to  the  aid  of  promoters. 

The  distinction,  however,  between  "commercial"  and  "financial"  banking 
must  be  sharply  defined.  For  instance,  let  it  be  assumed  tli.it  marginal  specu- 
lation in  stocks  is  to  continue  and  to  be  aided  by  our  banking  institution-. 
On.-  of  the  principal  assets  of  the  banks  in  time  of  money  panics,  when  the 
mercantile  and  commercial  bouses  of  the  country  are  in  need  of  assistance  from 
I  be  banks  in  order  to  keep  business  and  prosperity  alive,  is  found  to  be  a  mass 
of  securities.  Unencumbered  and  valuable  as  they  are  supposed  to  be  for  re- 
demption into  ready  money  with  which  to  meet  crying  demands,  actual  prac- 
tice  proves  they  are  of  little  ready  service. 

A  page  taken  from  recent  financial  history  shows  that  when  a  money  pinch 
came  on  in  the  fall  of  1902,  banks  were  largely  loaded  up  with  security  col- 
lateral. When  business  of  the  country  suffered  from  enormous  liquidation  the 
banks  in  almost  no  degree  took  their  stocks  to  market  in  order  to  free  capital 
for  other  commercial  needs.  Loans  out  on  security  collateral  were  called  in 
and  the  owners  had  to  -ell  their  stocks  in  a  declining  market  in  order  to  meel 
their  loan-,     lint    Mm-  banks  rather  than  cause  further  panic  by  adding  their 

holdings    to    those    in    process    of    liquidation,    bought    more    in    time    of   financial 

peril,  thus  -fill  further  tightening  money  supplies  and  adding  to  the  weight  of 
liquidation  upon  the  country.  Indeed  in  the  last  thirty  years  the  banks  have  in- 
creased their  holdings  of  securities  from  a  modest  amount  to  aboul 
$500,000,000. 

\V<  have  seen  what  the  tendency  is  among  members  of  the  Money  Trust  to 
work  together.  This  affiliation  through  the  quesl  for  dollars  in  "high  financial" 
operations  has  developed*  as  i-  shown  later  in  this  volume,  at  a  class  -pint  that 
makes  even  competing  money  interests  fighi   Bide  by  side  when  opposed  |>v  ., 


PERILS   OF    THE   MOM.)     TRUST. 


So  grea,   ftrc  the  profits  along  the  line  of  risky   promotion  and 
„    financiering  that    frequently    thej    have  tempted   bankers   from   the 
rtu,  even  as  viewed  ...  the  light  of  "high  financial"  ethics.  Frequently, 
.  „,.  find  the  tendency    for  a  development   of  banking  methods  which 
,   themselves    impair   the  old    fashioned   moral   code  of  "Honesty   is   the  besl 
It   i.  not  beside  the  point  to  say  thai   the  hank  president  whose  busi- 
;8  .,,  |„    :l  frequent   member  of  speculative  syndicates  is  tempted  to  turn 
quickly  and  easy,  though  doubtfully  honest,  dollar  by  using  his  wards'  de- 
posits   for   the   purpose  of   personal   speculation.      Of   course  this  amounts  to 
lothing  h\   barefaced  peculation.     Still,  small  as  the  hazard  of  modern  banking 
this  direction,   the  danger   in   some   measure  can   he   laid   to  the  door  of 
"high  finance"  banking. 

\\ 'hat  the  outcome  of  both  expansion  and  the  tendency  to  embark  further  on 
the  sea  of  "financial"  banking  (and  the  former  is  due  largely  to  the  latter) 
0\  dear.  It  appears  quite  logical,  however,  that  a  day  must  come  when 
the  banks  whose  business  it  is  largely  to  serve  the  Wall  Street  speculative  and 
underwriting  constituency  must  be  equipped  with  resources  specially  adapted 
to  this  sort  of  business,  leaving  "commercial"  hanks  to  their  particular  field. 

The  Wail  Street   Journal,  a  paper  published  in  the  interests  of  the  capi- 
talists in  the  heart   of  the  country's  financial  center,  points  out  these  dangers 

,ii  this  mannt  r  : 

\\  hat    is   taking  place   is  a  concentration  of  banking  that   is  not   merely 
a    normal    growth,   but    a   concentration    that    comes    from    combination,   consoli- 
dation  and   other  methods  employed   to  secure  monopolistic   power.      Not  only 
but    this  concentration   has  not   been  along  the  lines  of  commercial  hank- 
Tin-    great    hanks   of   concentration    are    in    close     alliance     with     financial 
sts  intimately  connected    with    promotion    of    immense    enterprises,    many 
,.  in  being  largely  speculative.     The  hank  credits  of  the  country  are  being 
dlj    concentrated  ill  the  hands  of  a  few  hankers,  who  are  more  interested  in 
it-  financial   [watered  slock-,  etc.  |   side  than    in    banking    on    its 

centration  as  this  is  dangerous  in  a  political  sense.     The  people 

:  •.   been  greatly  disturbed  by  the  concentration  that  has  taken  place 

industrial  world,  and  the  fear  that   these  aggregations  of  capita]  would 

powerful  than  tin    government  itself  has  led  to  the  enactment  of 

ik<    tin    Sherman  anti-trnst  law  and  to  measures  like  that  of  the  suit 

Northern    Securities   Company    [the   great   railway   merger  of  the 

Me.  nt  rat  ion    in   the   industrial    world   is  a   far  less  menacing 


PERILS   OF    THE   MONEY    TRUST.  81 

condition  than  concentration  in  banking.  The  men  or  the  set  of  nun  who 
control  the  credits  of  the  country,  control  the  country.  And,  if  this  concen- 
tration continues  at  the  rapid  rate  with  which  it  has  progressed  in  the  past  ten 
years,  there  will  surely  come  a  time  when  the  people,  alarmed  at  the  growth, 
will  rise  up  in  some  vigorous  measures  to  assert  their  power.  Such  an  uprising- 
would  involve  the  most  serious  consequences  and  would  likely  he  carried  to  the 
most  unreasonable  limits.  Yet  there  can  he  no  doubt  that  further  concentra- 
tion of  banking  power  in  New  York  is  the  end  in  view  of  some  of  our  leading 
bankers.  They  believe  that  there  will  be  a  further  reduction  in  the  number  of 
banks,  and  of  a  further  increase  in  the  power  of  the  big  banks.  That  is  one 
reason  why  this  banking  concentration  needs  to  be  studied  and  its  consequences 
carefully    weighed. 

"Hut  there  i-  still  another  reason  why  this  development  in  modern  banking 
is  open  to  criticism.  It  is  largely  a  departure  from  commercial  [legitimate] 
banking.  It  is  turning  the  power  over  the  bank  credits  into  financial  [stock 
promotion  |  channels.  So  long  as  the  country  is  prosperous  no  immediate 
danger  may  be  apprehended  from  such  a  development  as  that.  Moreover,  no 
one  can  question  the  extraordinary  ability  in  which  these  institutions  are  con- 
trolled, nor  the  intention  of  their  officers  to  operate  them  on  a  policy  that  will 
secure  them  against  any  possible  disaster.  Hut  it  is  always  the  unexpected 
th.it  happens,  and  our  panics  are  commonly  ushered  in  by  some  unforeseen 
calamity,  and  it  I-  a  fair  inquiry  to  make  whether  banking  conducted  on  a 
'department  store'  principle,  with  credits  concentrated  in  a  few  great  institu 
tions,  and  with  these  institutions  having  large  interests  in  financial  and  specu- 
lative enterprises,  would  be  in  a  position  in  such  a  moment  of  unexpected 
Calamity    to  do   more   than    to   protect    the  financial   and   speculative   interests   with 

which  it  i-*  allied.  In  such  a  contingency  what  protection  would  be  left  for 
the  great   commercial  interests  of  the  country? 

••'There  has  been  a  congestion   of  money   in    New    York,'  said   a   report    made 

I,,  i|1(.  recnt  convention  of  Illinois  bankers,  'which  leads  to  unwise  speculation 
,.,,.,!  crcai  •  conditions  resulting  in  unstable  and  fluctuating  rales  of  interest.' 
To  this  condition  banking  concentration  contributes." 


JAMES  H.  KYDE,  JAMES  W.  ALEXANDER, 

Equitable    Life    Assur-  President    of    the    Equitable    Life    Assurance 
■  ty  and   owner  of  a   majority  •  '"  " 'li-  . 

of    iis   capita]    stock. 


OEOBGE    GOULD, 


JOHN    A.    McCALL, 
President  of  the  New  York   Life  Insurance  Co. 


CHAPTER   VI 

THE  LIFE  INSURANCE  TRUST,  ONE  OF  THE  GREATEST  FINAN- 
CIAL SCANDALS  OF  THE  AGE. 

Money  Power  of  Life  Insurance  Companies — How  the  People's  Savings  Are 
Used  for  'Prust  Promotions  and  Other  Speculative  Enterprises — The  Scan- 
dal and  Jealous  Strife  for  Control  of  the  Enormous  Holdings  of  One  Com- 
pany—  Who  Owns  the  Surplus? — Gleanings  from   the  Committee  Report. 

It  ls  doubtful  if  a  very  great  number  of  tbc  thousands  of  people  who  have 
invested  in  life  insurance  realize  the  magnitude  of  the  power  of  the  insurance 
companies,  or  that  next  to  the  banks  these  institutions  control  more  of  the 
savings  and  wealth  of  the  country  than  any  other  single  combination  of  finan- 
ce rs.      Rut  such  is  the  astounding  fact. 

Today  the  total  assets  controlled  by  the  life  insurance  companies  of  the 
Unit.-d  Stat.,  amount  to  at  leasl  $2,500,000,000,  while  there  are  at  hast 
25,000,000  life  insurance  policies  of  all  kinds  now  outstanding  in  this  country. 
When  it  is  known  that  there  are  only  7,305,448  people  in  the  United  States 
with  savings  bank  deposits  to  their  credit  and  that  the  total  of  the  sayings 
deposits   is  $8,060,178,611,  while  all  other  kinds  of  bank   deposits  bring  the 

total  deposits  controlled  by  the  banks  of  the  country  up  to  about  $11,000,000,- 
000,  it  will  be  seen  what  a  great  factor  are  the  small  sayings  which  the  people 
contribute  to  these  insurance  concerns. 

The  great  inter.. t  which  bas  developed  of  late  in  the  affairs  of  the  insur- 
ance sompanies  is  due  largely  to  the  remarkable  growth  of  the  institutions. 
With  25,000,000  policies  outstanding,  many  of  them,  of  course,  representing 
several  policies  on  the  lite  of  one  individual,  nearly  every  person  in  the  United 

es  i-  directlj  interested  in  life  insurance.  If  each  person  in  the  country 
i.  not  insured  himself,  doubtless  some  relation  near  enough  to  him  has  invested 

in  this  sorl  of  a  saving  institution  to  make  it  worth  while  knowing  what  this 
great   aggregation  of  financial    power  is  and    how    it    acts  and   USes  its  power. 

That  this  interest  has  been  so  lively  that  the  whole  country  has  to  some 
<\lenl    mad.-  an    investment    in    insurance   is   shown    bv    the   figures    which   indicate 

Hie  growth   <>f   this   financial    power   in    the   last    twenty  five  years.     In    1880, 

when   life  insurance   was   not    so   well   Known   and    well   tried   as   now,   the  assets   of 

H'.i 


st  THE   I  IFE   INSURANCE   TRUST. 

all  lit'.'  insurance  companies  of  the  United  States  amounted  to  $452,000,000. 

s  was  1.01  percent  of  the  wealth  of  the  country  a1  thai  time— $42,000,000,- 

Today,  with  the  wealth  of  the  country   increased  to  $108,000,000,000, 

life  insurant    assets  have  rushed  up  to  $2,500,000,000,  or  2.42   per  cent  of 

the  nation's  wraith.     The  gain  in  the  wealth  of  the  country  in  25  years  was 

1  PVJ  per  cent  ;    but  the  gain  in  life  insurance  assets  was  454.2  per  cent. 

This  is  an  extraordinary  statement,  but  it  is  true.  And,  furthermore,  as 
startling  figures  can  be  broughl  forward  to  show  the  rate  at  which  the  annual 
income  of  these  insurance  companies  is  growing.  In  1901-  the  income  of  all 
companies  of  the  country  was  marly  $600,000,000.  In  the  fiscal  year  of  1904 
the  government  of  the  whole  United  States  had  an  income  of  $684,000,000, 
or  only  $84,000,000  more  than  the  life  insurance  companies  operating  under 
this  government. 

I  low  rapidly  life  insurance  assets  have  increased  in  the  United  States  is 
>hown  by  the  following  table,  giving  the  total  assets  in  five-year  periods  from 
L880  to  HM).-,: 

1880 $    452,000,000 

1885 551 ,()()(),()()() 

L890 770,000,000 

1895 1,159,000,000 

1900 1,742,000,000 

1905 2,500,000,000 

[1  is  of  interest  to  compare  this  growth  with  the  estimated  increase  in  the 
wealth  of  the  country  since  1880.     This  is  shown  by  the  following  table: 

Per  Cent  of 
Wealth  of  Country.     Life  [nsurance  Assets.     Assets  to  Wealth. 

1905 $103,000,000,000  $2,500,000,000  2.42 

1880 1-2,000,000,000  1)52,000,000  1.07 

[ncrease    .<fil.ooo.ooo.000  $2,048,000,000 

cent  of  ii  |  1,5.2  45  t.2 

1'       i  ot  wonderful  then  that  there  is  a  great  awakenment  in  interest  of  the 

ngs  are  building  up  these  companies  so  rapidly  that  the  finan- 

combined   concerns  almost    exceeds   that   of  the  government. 

the    people    want    to   know    is    what    is   being   done   with   their   savings, 

are   being   invested,   what    the  expenses  of   running  the  com- 

ind   what   ethical  and  economic   principles  underlie  insurance. 

I  of  all  this  money  power  lies  principally   with  what  are  called  "old 


THE  LIVE  INSURANCE  TRUST.  85 

line"   insurance  companies.     Not   counting  fraternal  organizations  and   lodges 

which  provide  insurance  for  their  members  there  were  in  1905  eighty-five  insur- 
ance companies  in  the  United  States.  These  companies  have  outstanding  $12,- 
535,000,000  of  insurance,  divided  into  nearly  21,000,000  policies.  In  1901  the 
outstanding  insurance  was  only  $8,581,000,000  divided  into  about  14,325,000 
policies.  This  growth  in  five  years  was  about  6,592,000  policies  and  $:3,954,- 
000,000  in  insurance. 

Of  this  enormous  total  money  power  nine  companies,  which  do  both  industrial 
and  life  insurance,  control  1 6,383,000  policies  and  $2,978,000,000;  in  1900 
these  companies  controlled  11,223,000  policies  and  $1,785,000,000  of  insurance. 
Industrial  insurance  is  in  small  amounts,  policies  averaging  only  $142  each,  while 
other,  or  ordinary,  insurance  policies  average  $2,011  each.  When  proper  allow- 
ance for  industrial  insurance  is  made  it  is  found  that,  while  about  75  per  cent 
lit'  the  number  of  policies  are  accounted  for  in  the  industrial  companies,  the 
amount  of  insurance  in  force  is  only  about  17  per  cent  of  all  insurance'.  Of  the 
eighty-five  insurance  companies  twenty-two  each  have  outstanding  policies  of 
more  than  $100,000,000  each.  In  all  these  twenty-two  have  outstanding  19,- 
21  !.()()()  policies  for  $11,197,000,000,  as  against  13,198,000  policies  for  $7,854,- 
000.000  in  1900.  Thus  all  but  1,613,000  policies  of  the  20,827,000  and  all  but 
s  1. 338, 000,000  of  the  $12,555,000,000  insurance  now  outstanding  are  controlled 
b\  the  twenty-two  leading  life  companies. 

lint  lei  us  carry  this  comparison  of  almost  fabulous  wealth  influence  still 
further.  The  six  biggest  companies  of  the  United  Stales,  as  measured  by  the 
amount  of  insurance  in  force,  arc  the  New  York  Life,  the  Mutual  Life,  the 
Equitable  Life,  the  Metropolitan,  the  Prudential  and  the  Northwestern.  All  bul 
the  last  named  carry  each  a  total  of  insurance  in  excess  of  $1,000,000,000.    The 

Vu    York    Life   has    reached   the  $2,000,000,000     mark     and     the     Mutual,     the 

Equitable  and  Metropolitan  each  have  about  $1,500,000,000.  These  six  com- 
panies together  have  $8,207,000,000  in  force  and  all  the  other  seven!  \  nine  com- 
panies have  onlj  $4,327,000,000.  Thus  about  two  thirds  of  all  the  life  insur- 
ance in  force  in  the  United  States  is  carried  by  the  "big  six."  And  over  to  per 
<-'iil  of  it  is  curie, I  by  tin  "big  three,"  the  New  York,  the  Mutual  and  the 
Equitable. 

If  was  in  the  lasl  named  the  Equitable  Life  Assurance  Society  thai  early 
in  1905  there  broke  out.  through  jealous  strife  for  control  of  the  enormous  hold- 
ings ol  tin  people's  savings,  the  worst  financial  scandal  perhaps  the  financial  age 
has  ever  known.  The  "row."  for  in  the  charges  and  countercharges  of  vicious 
financial  methods  made  by  the  giants  thai  were  fkrhtinc  for  the  control  of  stsT. 


THE  I  III'-  INSURANCE  TRUST. 

000,000  assets  of  the  company  (securities  which  had  been  purchased  with  the 
of  Qcarlj   600,000  policy  holders)  the  scandal  descended  into  the  very 
gutters  of  villification. 

It  all  came  about  because  Vice  President  James  Hazen  Hyde,  the  son  and 
heir  of  Henrj  B.  Hyde,  the  founder  of  the  Equitable,  gave  a  fancy  party  to  the 
brated  French  actress,  Mme.  Rejane.  There  were  other  things,  but  this  din- 
ner, where  $100,000  was  said  to  be  spent  for  Lavish  entertainment  and  where, 
irding  to  report,  the  actress  danced  the  "can  can"  for  the  entertainment  of 
Mr.  Hyde  and  his  guests,  brought  the  company  before  the  community  in  such  a 
bad  light  that  President  dames  W.  Alexander,  bosom  friend  of  the  vice  presi- 
dent's father  and  trustee  of  the  stock  of  the  Hyde  family,  determined  to  force  the 
young  man  from  his  position. 

This,  at  Kast.  was  the  newspaper  talk  at  the  time  of  the  great  scandal,  but  a 
multi-millionaire  who  was  interested  in  the  fight  said  to  the  writer  that  "while 
young  Hyde  was  very  foolish,  Alexander  had  planned  for  some  time  to  deliber- 
ately secure  control  of  the  company."  It  was  for  this  reason,  in  part,  that  when 
serious  charges  were  made  against  Hyde,  countercharges  were  made  against 
Alexander  and  that  many  big  financiers  sided  with  tin-  young  vice  president. 
But  in  order  to  understand  the  matter  it  must  be  shown  how  actual  control  of 
such  a  great    institution  as  the   Equitable  was  held. 

A'   tin-  time  thi^  row  came  up  James  H.  Hyde  was  only  29  years  old.     His 
father,  who  had  founded  the  company  in  1  >S59,  capitalized  the  institution  for 
$100,000.     At  that  time  the  concern  was  managed  by  those  who  owned  this  stock, 
the  policy  holders  dialing  in  dividends  and  profits  about  like  those  of  other  com- 
panies but  not  having  the  right  to  vote  and  say  what  should  be  done  in  the  man- 
lent  of  the  society.     When  Hyde,  senior,  died  he  left  about  60  per  cent  of 
thi>  stock  to  his  miii.  who  became  vice  president  of  the  company.      The  society 
ad  become  very  powerful  and  prosperous.     Life  insurance  had  become  a  method 
for  people  of  small  means  to  save  their  money.     The  assets  of  the  society  grew 
ich  an  extent  that  new  capital  stock  was  not  needed  to  run  the  company,  for 
Dney  of  the  people  was  sufficient.     In  time  this  grew  until  today  the  com- 
bout  $478,000,000  in  securities.     Of  this  the  policy  holders  could 
,000,000  and  the  stockholders  about  $81,000,000.     It  will  be  seen, 
it   power  was  centered  in  stock  left  to  young  Hyde,  for  $60,000 
ontrolled  the  comoany  and  therefore  controlled  $187,000,000  of  invest- 
ment s<  curit 

'■-i  for  any  young  business  man  was  this  power  that  the  senior 
HJde  kft  *'    !  nt  Alexander  the  trusteeship  of  this  controlling  stock  until 


THE  LIFE  INSURANCE  TRUST.  87 

his  son  James  H.  Hyde  should  reach  30  years  of  age.  It  will  be  seen,  then,  that 
when  the  row  broke  out  Alexander  had  but  one  year  to  remain  in  power,  unless 
he  could  get  Hyde's  consent.  If  an  ulterior  motive  were  desired  it  could  be 
possible  to  say,  as  in  fact  it  was  said,  that  President  Alexander  wished  to  dis- 
credit the  young  vice  president  before  the  financial  world  in  order  to  force  his 
resignation  and  then  change  the  voting  power  of  the  company  so  that  Alexander 
would  continue  in  control  after  Hyde  reached  30  years  of  age.  Whether  this  be 
true  or  not,  the  war  that  resulted  went  so  far  that  many  of  the  nooks  and 
crannies  of  the  world  of  finance,  generally  so  dark  that  none  but  the  "insiders" 
could  know  what  was  there,  were  explored  by  the  business  searchlight. 

In  the  first  place  President  Alexander  declared  that  it  was  not  just  to  permit 
a  condition  which  did  not  allow  nearly  600,000  policy  holders  of  the  company  a 
voice  in  the  management  of  their  $487,000,000  of  savings.  To  that  end  one  of 
humanity's  pleas  for  the  "square  deal"  arose  in  the  demand  by  the  president  that 
the  company  be  mutualized — that  is  that,  whereas  before  the  officers  and  directors 
were  elected  by  the  vote  of  the  stockholders  (really  one  man,  James  H.  Hyde's 
representative),  now  every  policy  holder  should  have  a  vote  at  election.  Inas- 
much as  other  big  insurance  companies  have  this  method  of  voting,  the  Hyde 
party  conceded  to  this  demand.  Hut  this  was  because  it  was  expected  the  policy 
holders  could  be  controlled  as  easilj  as  the  stock.  The  stumbling  block  to  peace 
terms  was  the  enormous  surplus  of  about  $81,000,000,  which  under  the  law  was 
owned  by  the  stockholders,  hence  by  Mr.  Hyde  and  a  few  others.  It  was  feared 
that  the  Alexander  party  had  designs  on  this  vast  fortune;  hence  Hyde  decided 
to  fight. 

On  tin  board  of  directors  of  the  Equitable  Life  were  some  of  the  greatest 
financiers  of  the  world.  Most  of  these  men  threw  the  power  of  their  influence 
to  Hyde.  This  incensed  the  Alexander  interests,  who  seemed  to  be  seeking  con 
trol,  although  they  professed  only  to  be  seeking  the  best  interest  <>f  the  policj 
holders.  The  result  was  charges  of  the  most  serious  nature  made  against  Hyde 
and  many  of  the  most  prominent  of  the  directors.  Some  of  the  charges  made 
against  Hyde  and  his  friends  wer<  : 

1.  That  Hyde  charged  to  the  Equitable  Life  Assurance  society  the  expenses 
incurred  in  his  format  ion  of  the  Cercle  Francais;  the  expenditures  due  to  hi>  four 
in  hand  coaching  trips  from  Holland  house  to  Ardslcy  through  the  park,  in 
which  Alfred  Vanderbilt  participated;  private  dinners  given  bv  him  to  distin 
guished  individuals,  chief  among  them  M.  Cambon,  ambassador  from  France  to 
the  United  States.  That  with  all  these  things  he  burdened  the  Equitable 
exchequer,  asserting  anything  he  did  that  brought  him  into  the  light  of  pub- 


THE  I  III-  INSURANCE  TRUST. 

liciti  limbic  advertising  for  the  Equitable  and  thai  the  society  therefore 

'  to  p.u   for  it. 

That  the  item  <>t  "advertising"  showed  the  results  of  these  extraordinary 
expenditures  !>\  its  enormous  increase  in  the  last  few  years.  The  advertising 
item  alone  in  1904  exceeded  $500,000,  although  given  in  such  ;i  way  that  it  was 
not  possible  to  tell  from  il  what  the  real  expenditure  was.  The  items  "commis- 
sions, advertising,  postage,  and  exchange,"  being  taken  together,  totaled  at 
In  1903,  without  "commissions  to  agents,"  the  items  "adver- 
tising, postage,  and  stationery"  reached  the  staggering  total  of  $700,971. SO. 

:>.  That  the  ventures  were  financed  with  Equitable  funds,  by  which  private 
individuals  profited  more  largely  than  the  life  assurance  society,  although  it  was 
Equitable  money  that  made  the  investment  possible. 

!.  That  there  was  impropriety  in  the  managemeni  of  the  financial  affairs 
of  tlie  society. 

o.  That  the  manner  of  life  of  James  Ila/.cn  Hyde  raised  questions  as  to  his 
business  r<  sponsibility. 

(i.  That  Hyde  was  in  absolute  control  of  the  surplus  of  $80,79-1,269,  and 
that  while  he  could  not  take  it  personally  he  could,  by  an  extraordinary  expendi- 
ture, materially  decrease  or  entirely  dissipate  it. 

", .  That  through  his  influence  there  was  carried  in  trust  companies  and  other 
institutions  in  which  he  had  a  personal  interest,  money  that  should  be  invested 
and  earning  inter*  si . 

That  the  Equitable  conservatism  was  at  an  end,  and  that  the  expense 
it  which  insurance  was  carried  by  the  society  was  increasing  yearly. 
9.     That  by  the  arbitrary  exertion  of  his  will  he  forced  many  expenditures 
that  were  inadvisable  and  which,  were  they  known,  would  he  injurious  to  the  con- 
tinued prosperity  of  the  society. 

lu.  That  he  carried  numerous  personal  employes  on  the  roll  of  the  Equit- 
able  and  insisted  they  should  be  paid  from  the  Equitable  funds. 

11.      That  he  used  hi-  portion  as  chairman  of  the  finance  committee  of  the 
to  obtain  hi-  election  as  a  member  of  the  hoard  of  directors  of  many 
institutions. 

t    Hyde  held  a  club  over  the  head  of  every  officer  of  the  society; 

it  impossible  for  them  to  do  other  than  obey  his  dictates;  and  that 

r  to  depose  or  dismiss  any  officer  or  employe  who  opposed  his  will. 

since  Hyde  came  into  control   the  policy   holders  did   not  have  the 

t    the)    reposed  in   the  management  of  the  company  during 

the  lifetinx    of  his  father  and  the  period  immediately  following  his  death. 


THE  LIFE  INSURANCE  TRUST.  89 

14.  That  Hyde's  domination  already-  had  caused  dissension  in  the  board  of 
directors  by  the  arbitrary  enforcement  of  his  will,  one  of  the  occasions  being  that 
on  which  he  insisted  the  society  should  pay  for  the  Canibon  dinner. 

In  turn  the  Hyde  party  responded  with  countercharges  of  breach  of  faith 
by  President  Alexander.     Some  of  these  charges  were: 

1.  That  Alexander  paralyzed  the  Equitable  society's  credit. 

2.  That  he  did  everything  lie  could  do  to  hurt  the  society  and  nothing 
whatever  to  help  it. 

.'3.  That  he  broke  his  promise  to  keep  quiet,  and  opened  up  "the  sewers"  in 
violation  of  this  promise. 

4.      That  his  charges  brought  against  Hyde  were  untrue. 

(a)— That  Williamson,  who  had  been  alleged  to  be  the  gardener  at  Bay- 
shore,  whose  wages  were  stated  to  be  an  extravagant  figure,  paid  by  the  society, 
really  was  the  confidential  man  in  charge  of  the  foreign  business  of  the  Equitable, 
who  had  been  with  the  society  many  years,  his  services  dating  back  to  the  time  of 
the  late  Henry  B.  Hyde,  whose  stenographer  he  was,  and  that  Williamson 
handled  the  foreign  business  of  the  Equitable  from  the  office  of  Hyde  at  his 
residence,  !)  West  Fortieth  street,  New  York. 

(b)--That  the  Canibon  dinner,  the  expenses  of  which  were  said  to  have  been 
$30,000,  really  cost  only  $6,000,  and  that  this  dinner  was  a  business  venture  and 
not  a  •"society"  affair  in  any  way.  There  was  not  a  society  man  there.  All  the 
guests  were  selected  because  of  their  prominence  in  a  business  way. 

(c)  Thai  Alexander  had  as  much  to  do  with  getting  up  the  affair  as  any 
one  else.  Five  of  Alexander's  supporters  were  there.  All  the  directors  wire 
invited.  It  was  a  discreditable  thing  for  the  exact  situation  to  become  public, 
but  Prcsidenl  Alexander  "besmirched  the  society"  by  bringing  it  out. 

All  this  was  very  interesting  to  the  newspaper  reading  public  and  the  slock 
holder--,  but   tin   dcvelopmenl  which  raised  the  question  as  to  how  the  savings  of 
the   policy   holder^  were  being  used   caused   the  greatest    public  clamor.      four  of 

the  most  influential  directors  of  the  Equitable  wire  August  Belmont,  American 
representative  of  the  great  European  money-lending  famih  of  Rothschilds; 
George  J.  Gould,  head  of  the  grcal  capitalistic  family  of  Gould  and  in  control 
of  th«'  Gould  Bystem  of  railroads  and  other  big  corporations;  Edward  II.  Harri 
man,  head  of  the  gigantic  railway  system  of  America  which  is  now  affiliated  with 
the  Rockefellers,  and  Jacob  Schiff,  Mr.  Harriman's  banking  partner  in  the  firm 
of  Kuliii.  Loch  \  Co.,  iIk-  most  powerful  private  banking-house  in  America,  and 
director  with  Harriman  and  others  iii  mam  big  corporations.  Besides  these  men 
were  oilnr  millionaires  such  as  A.  d.   Vanderbilt,  I).   II.  Moffatt,  ('.   Ledyard 


THE  LIFE  INSURANCE  TRUST. 

H  r,  John  Jacob  Astor,  M.  E.  [ngalls,  A.  J.  Cassatt,  James  J.  Hill,  Henry  C. 
1  i,  i  .  \.  Bliss,  Chauncey  Depew,  1).  ().  Mills,  Bradish  Johnson,  V.  P. 
Snyder,  .1.  .1.  McCook  ami  others,  who  threw  their  influence  to  Hyde. 

New,  when  recriminations  came  thick  and  fast  it  was  said  that  these  railway 
presidents  and  bankers  were  in  the  directory,  not  for  their  health,  but  to  make 
mom  \  out  of  the  policy  holders  by  selling  to  the  Equitable  Life  Assurance 
society  millions  upon  millions  of  the  stocks  and  bonds  of  their  companies  at  high 
prices  and  getting  fat  commissions  for  doing  so.  Thus  they  were  charged  with 
being  in  the  doubtful  position  of  not  being  able  to  act  justly  by  the  policy 
holders  of  the  Equitable  in  selling  stocks  and  bonds,  for  it  was  said  naturally 
they  would  try  to  make  good  profits  for  themselves  on  these  sales.  This  was  one 
of  the  principal  objections  raised  against  Hyde,  for  he  was  said  to  have  favored 
huge  speculative  schemes  with  these  men,  using  the  money  of  the  Equitable.  An 
effort  was  made  to  oust  Messrs.  Schiff  and  Harriman  because  it  was  said  in  one 
year  their  firm  of  Kuhn,  Loeb  &  Co.  sold  to  the  Equitable  $22,000,000  of  bonds. 
In   this  fight    the   personal   honesty  of  the  men   was  not  impugned,  but   it   was 

1  ted  that  they  could  not  justly  act  as  both  buyers  and  sellers.  It  was  stated 
that  oik  of  the  principal  reasons  why  Mr.  Harriman  was  on  the  board  of  the 
company  was  because  he  Deeded  its  aid  in  borrowing  huge  sums  of  money  in  his 
t  railway  financial  schemes. 

Another  development  which  did  not  appear  just  to  those  who  were  waging 
war  against  a  system  which  would  permit  $51,000  par  value  stock  of  the  Equit- 
able to  control  $487,000,000  of  wealth,  was  the  fact  that  some  of  these  powerful 
directors  had  almost  no  stock.  Messrs.  Harriman  and  Schiff  were  what  were 
known  a-  "five  spotters,"  having  only  rive  shares  of  stock  each,  though  of  course 
this  -to<k  was  very  valuable  for  the  power  it  conferred  upon  them.  But  even 
i  se  shares  woe  not  owned  by  these  men  in  their  own  right.  In  fact  neither 
owned  a  share  and  neither  was  insured  for  one  dollar  in  the  life  insurance  com- 
pany which  they  dominated.  This  sort  of  business,  indeed,  is  not  uncommon  in 
financial  circle-.  These  men  were  what  were  called  "dummy"  directors,  being 
tock  so  that  the  law  requirements  would  be  met,  for  the  charter  of  the 
tabic  requires  "that  each  director  shall  be  proprietor  of  five  shares."  It 
E  d  that  the  way  these  men  secured  the  stock  was  by  borrowing  it  from 
young  Hyde,  having  it  registered  on  the  books  of  the  Equitable  in  their  names 
and  then  turning  it  back  to  Hyde,  who  placed  it  again  in  his  own  "strong  box." 

of  course  m<  n  of  such  great  financial  standing  resented  such  charges.  They 
•hat   while  they  had  made  financial  transactions  in  which  they  had  sold 

ks  and  bond-  to  the  company  for  themselves,  the  securities  were  good  value 


THE  LIFE  INSURANCE  TRUST.  1)1 

and  they  personally  had  not  conducted  the  transactions.  Here  is  a  typical  reply 
made  to  charges  issued  by  the  great  banking  house  of  Kuhn,  Loeb  &  Co. : 

"Mr.  Schiff  first  learned  some  twelve  days  ago  of  the  trouble  which  was  brew- 
ing, when  he  was  called  upon  by  counsel  for  Mr.  Alexander,  who  advised  liini  of 
Mr.  Alexander's  determination  to  oust  Mr.  Hyde  from  the  control  of  the  com- 
pany through  a  movement  to  transfer  the  control  to  the  policy  holders.  Mr. 
Schiff  from  the  outset  declared  himself  as  unqualifiedly  in  favor  of  participation 
by  the  policy  holders  in  the  control  of  the  society,  insisting,  however,  that  this 
should  and  must  be  brought  about  in  a  dignified,  orderly  and  just  manner. 

"Further,  he  held  that  the  board  of  trustees  should  become  directly  respon- 
sible to  the  policy  holders  for  the  management  of  the  company  rather  than  that 
the  control  should  pass  to  the  executive  officers  through  the  obtainment,  in  their 
own  names,  of  the  proxies  of  the  policy  holders. 

"The  gist  of  the  entire  controversy  is  this:  Mr.  Alexander  and  his  associates 
desire  to  secure  control  of  the  company  and  elect  a  board  of  trustees  of  their 
own  making. 

"Those  oppox-d  to  .Mr.  Alexander  insist  that  if  the  policy  holders  partiefpate 
in  the  control  they  should  be  enabled  to  vote  unt  rammeled  by  the  interference 
of  tin'  executive  officers  and  that  the  latter  be  elected  by  and  be  responsible  to  the 
board  of  trustees  rather  than  being  made  the  masters  of  the  board. 

"As  to  the  statement  that  Mr.  Schiff  as  a  director  of  the  society  had  taken 
pari  in  the  purchase  by  the  latter  of  a  large  amount  of  securities  from  the  linn 
of    Kuhn,    Loeb   <X;    Co.,    Mi-.    Schiff   says    that,   though   a    member  of   the   finance 

committee,  he  is  not  and  has  consistently  declined  to  become  a  member  of  the 
utive  committee,  which  is  alone  empowered  to  make  the  purchase  of  securi 
tie>  on    behalf  of   the  society;   that    whatever  dealings   his  linn   has   had   with   the 
Equitable  society  have  been  most  advantageous  to  the  latter. 

"If  his  firm   has  sold  high  class  investmenl   bonds  to  the  Equitable,  il   has 

-old    o|    tin'    same    bonds    many    more    millions    during    the    same    period    to   other 
insurance  companies  in   which   Mr.  Schiff  is  not  a  director. 

"No  offer,  Mr.  Schiff  says,  has  at  any  time  been  made  by  him  to  Mr.  llyde 
lOT  Ins  majority  stockholding  in  the  Equitable  society;  to  the  contrary,  Mr. 
Schiff  has  insisted  throughout  that  if  the  stockholding  were  to  be  dealt  with 
nothing  must  he  done  with  il  except  it.  retirement  by  the  Equitable  Assurance 
itself  under  aulhoril  y  of  law  ." 

A  typical  implication  of  duplicity  in  the  financial  affairs  of  the  Equitable, 

Uh;i1    i-  '.die,!  in  modern  banking  circles  "high  finance,"  was  that   connected   with 

the  purchase  of  the  Western  Maryland  Railroad  in  dune,  1902.    This  road  was 


nil.  1  ill.  INSURANCE  TRUST. 

.Jit  to  ui\e  the  Gould  railway  system  a  tide-water  terminal  at  Baltimore. 
\\     !i  another  small  road  the  Western  Maryland  connects  with  the  Wabash.    The 

I   wa>  taken   ii|>  h\    what   was  known  as  the   Fuller  syndicate  of  which  George 

.1.  Gould,  one  ot'  the  so  called  "dummy"  directors  or  "live  spotters"  of  the  Equit- 
able Society,  was  a  prime  mover.  It  was  said  he  induced  a  number  of  the 
-  ot'  the  assurance  society  to  become  interested  in  the  syndicate.  Although 
this  pool  paid  only  about  $8,751,000  for  the  Western  Maryland,  two  bond  issues 
wiie  promptly  math',  their  aggregate  being  $85,189,000.  The  first  issue  was 
for  $25,189,000  ot'  first  mortgage  bonds  and  the  other  a  second  mortgage  for 
$10,000,000.  The  capita]  stock  of  the  road  is  $16,000,000,  making  in  all  over 
$50,000,000  securities  for  the  road  which  cost  less  than  $9,000,000.  On  this 
basis  then    would  he  about    IS   per  cent   value,  and  S°,  per  cent  "water"  in  these 

rities,  although  doubtless  much  of  the  proceeds  of  the  stock  and  bonds  when 
sold  weid  to  build  up  property. 

Tie  officer,  of  the  Equitable  put  $1,830,000  into  this  venture.  The  society 
took  $1,01  ii. (KM)  in  shares  in  the  syndicate  formed  to  sell  the  bonds,  paying  in 
cadi  $915,000.  It  also  purchased  $1,000,000  of  bonds,  paying  $915,000  for 
tin  m.  Both  of  these  investments  at  one  time  showed  losses,  according  to  the 
n  ports  of  the  society.  Besides  selling  to  the  Equitable  Life,  the  Western  Mary- 
land syndicate  sold  out  to  the  Mercantile  Trust  company,  the  Equitable  Trust 
company,  thi  Lawyers'  Title  Insurance  company  and  other  financial  institutions 
which  the  Equitable  Life  Assurance  Society  either  controlled  or  owned. 

!  ii    the   fight    for   the  control    of  the   Equitable,  therefore,   was 

simply  the  management  of  the  insurance  business,  but  the  vast  financial  power 
which  came  from  the  company's  control  of  certain  banking  institutions  and  its 
influence  on  others,  for  instance,  in  the  published  records  Mr.  Hyde  was  a  mera- 
I"  r  of  the  hoard  of  directors  of  at   least  fifty  well  known  financial  institutions. 

•    of  tin  in  are:    the  Mercantile  Trust,  Equitable  Trust,  Lawyers'  Title 

nd  Trust,  and   Lawyers'   Mortgage  companies  of  New  York;  the  Commercial 

t  and  the  Franklin   National  bank  of  Philadelphia,  Mercantile  Safe  Deposit 

York,   Security   Safe   Deposit   of   Boston   and   Missouri   Safe  Deposit  of 

Louis.     These,  with  the  Mercantile  Trust  company.  United  States  Mortgage 

Trust  company,  and   Fifth  Avenue  Trust  company  of  New  York;  the  Central 

and    Bond   company.    Fidelity   Trust   company   of    Philadelphia,  and  the 

Trust   company  and    Union    National   Bank   of   Newark:  Union   Trust 

of   Elizabeth  and   the   Esses   Countv   Trust    company  of  East    Orange 

1    in    the    Equitable   Life-Mutual    Life  National   Bank   of  Commerce 

financial  powers. 


THE  LIFE  INSURANCE  TRUST.  93 

In  the  chapter  on  the  "Money  Trust"  it  was  stated  that  there  was  a  great 

interrelation  of  financial  interests  between  the  three  bi*^  insurance  companies  oi' 
New  York  and  the  banking  powers.  In  addition  to  the  group  just  named  must 
be  considered  the  affiliations  of  the  First  National  Bank  of  New  York,  or  "Mor- 
gan" institution,  which  includes  the  influence  of  the  First  National  Bank  of 
Chicago,  the  Chase,  Liberty  and  Astor  national  banks  of  New  York,  the  Man- 
hattan Trust  company  of  New  York  and  the  New  York  Life  Insurance  company. 
Apparently  nowhere  else  in  the  world  is  such  a  huge  dominating  financial  interest 
shown.  But  this  chain  extends  still  further  through  friendly  relations  between 
the  Equitable  and  the  Mutual,  for  these  two  practically  control  the  National 
Bank  of  Commerce  of  New  York,  which  in  turn  is  affiliated  with  the  National 
City  or  "•Standard  Oil"  bank.  This  National  Bank  of  Commerce  is  one  of  tin 
largest  banks  of  the  country,  which,  with  capital,  surplus  and  deposits  control* 
$189,000,000.  These  two  life  insurance  companies  and  this  bank  form  the  cen- 
ter of  a  financial  web  reaching  out  through  banks  and  trust  companies  in  various 
cities  with  ;ism  ts  and  deposits  of  more  than  a  billion  dollars.  All  told,  through 
these  myriad  interests  marly  $2,000,000  was  influenced  by  the  power  wielded 
by  the  $51,000  nominal  value  of  Equitable  stock  owned  by  young  Hyde,  which 
he  increased  later  to  about  $90,000  nominal  value  in  order  to  strengthen  his  grip 
of  influence  on  the  Equitable's  policy  holders'  wealth  and  savings. 

What  tin  actual  value  of  this  capital  stock  of  the  Equitable  was  lias  been  in 
doubt.  Before  the  row  broke  out  fourteen  shares  of  the  stock,  which  by  the  way 
paid  only  7  per  cent  dividends,  were  sold  al  $3,000  each,  or  thirty  times  their 
par   value   of  $100  each.      About    that    time   it    was   report. d   that    Hyde   hail    been 

offered  $15,000,000  for  his  firsl  $51,000  of  stock.     At   that   time  ii    was  said 

ndard  Oil"'  wanted  the  stock. 
Some  of  t  he  financial  investments  of  the  Equitable  society  in  financial  institu- 
tions follow  : 

( 'apital  ( )w  in  (I  by 

Company.                                                   Slock.  Equitable.  Deposits. 

Mercantile  Trust  Co.,  New  York $2,000,000  $1,268,500  $76,500,000 

Fifth   Ave.  Trust   Co..  New  York....  1,000,000  231,200  15,285,000 

Commercial  Trust  Co.,  Philadelphia...  1,000,000  245,000  9,950,000 

Girard  Trusl   Co.,  Philadelphia 2,500,000  lo.ooi)  27,524,000 

Equitable  Trust  Co.,  New  York 8,000,000  1,293,100  U,877,000 

Franklin   Nat.   Bank,   Philadelphia....  1,000,000  100,000  21,500,000 

Fidelity  Trusl  Co.,   Philadelphia 2,000,000  250,000  20,900,000 

Lawyers'  Title  Ins.  Co.,  New  York  ....  :l..>o<u><H>  141,000        

Lawyers'  Mortgagi   <  !o  .  New  York.  .  .  2,500,000  k27,300       


otographic  Co. 

TYPICAL    NITW    YOKE    "SKY-SCBAPEItS." 

ol   the  in rj.'«  .<- 1   office  buildings  in  the  world.     Nowadays  structures 

in    lifi^lit   are    not    uncommon.      Office    buildings   such    as    are    here 

From  one  to  three  million  dollars.     The  great  banks,  life  insurance 

ad    own    these    buildings,    considering    the    same  a  safe   and 

■  tnent. 


THE  LIFE  INSURANCE  TRUST.  95 

International      Banking      Corporation, 

New  York    3,947,200  180,300  8,550,000 

Union  National  Hank,  Newark 1,500,000  100,000  7,370,000 

Central  Realty  Bond  &  Trust,  N.Y..  1,000.000  100,000  9,811,000 

First    National  Bank.  Chicago 8,000,000  2-19,000  100,000,000 

Hibernia  Bank,  New  Orleans 3,000,000  100.000  12,000,000 

First   National  Bank.  Denver.  .......  1,000,000  110,000  9,700,000 

Bank  of  .Montreal.  Quebec 11,000,000  40,000          

First   National  Bank,  .Minneapolis.  ..  .  2,000,000  20,000  0.500,000 

National  Bank  of  Commerce,  N.  Y.  .  .  25,000,000  1,500,800  161,000,000 

Some  of  the  investments  in  railroad  and  other  stocks: 

Stocks  owned  hv  Equitable. 

Pennsylvania    -$     662,000 

New   York,  New  Haven  and  Hartford 507,000 

Illinois  Central    50,000 

Delaware  &  Hudson 710,000 

Chicago  and  Alton  preferred 10.000 

Brooklyn  City   267,000 

Manhattan   Elevated    1,180,000 

New  York  Central 1,550,000 

Union  Pacific  preferred  syndicate 1,100,000 

Vu    York  and   Harlem.! 23,300 

Long  Hand   230,000 

Chicago  .V   Northwestern 720,000 

Chicago  .V  Northwestern  preferred 170,000 

[nterborough  Rapid  Transit 250.000 

Consolidated  Gaa  of  New  York 1.121.500 

The  contest  for  the  control  of  the  Equitable  Life  Assurance  Society  and 
for  ll,. ■  spoliation  of  the  policyholders  through  the  exploitation  of  their  sav- 
ings in  questionable  speculation  brought  on  a  crisis  in  life  insurance  affairs. 
This  came  through  the  appointment  of  a  committee  of  directors  of  the  cora- 
pany  to  investigate  the  charges  made  against  the  management  of  the  society. 
The  committee  was  composed  of  Henry  C.  Frick,  the  steel  and  coke  magnate, 
Cornelius  N.  Blis>,  prominent  financier  and  former  Secretary  of  the  Treasury 
of  the  United  States,  Edward  II.  Harriman,  railwaj  kin-.  Melville  E.  Ingalls 
and  Brayton  [ves.  The  report  which  these  men  made  concerning  the  rotten 
methods  of  "high  finance"  that  had  been  permitted  and  abetted  in  the  Equitable 

brought    down    a    storm    in    Wall    Street    the    like   of    which    had    not    hen    known 

in   v  a  re. 

President    Alexander  and    Vice   President    Hyde,   not    to  Bay   other  officers, 


THE  LIFE  INSURANCE  TRUST. 

were  excoriated  in  a  merciless  manner  by  the  report.  And  although  Alexander 
been  the  one  who  started  the  charges  againsl  Hyde,  the  young  vice  presi- 
dent finally  joined  forces  with  Alexander  in  order  to  suppress  the  report  of  the 
committee  and  prevent  the  policyholders  knowing  the  worst  about  the  society's 
management.     Hyde  explicitly  charged  Harriman  with  trying  to  buy  his  stock 

.  ridiculously  low  price  in  order  to  gain  control  of  the  company  and  he 
further  said  that  Harriman  had  "knocked  down  the  Equitable  and  dragged  it 
about   in  the  dust." 

Tlu  determined  stand  of  Hyde  not  to  relinquish  his  hold  on  his  stock  while 
under  fire,  and  the  refusal  of  the  board  of  directors  to  accept  the  investigating 
committee's  report  and  dismiss  officials  charged  with  mismanagement,  brought 
the  immediate  resignation  of  the  members  of  the  committee.  In  order  to 
exonerate  themselves  the  members  of  the  united  Alexander  and  Hyde  parties 
said  their  joint  action  was  solely  for  the  purpose  of  frustrating  a  gigantic 
conspiracy  to  seize  this  insurance  company  for  private  purposes.  The  out- 
come of  the  scandal  was  cleaner  practices  in  the  insurance  business,  the  re-ar- 
rangement of  official  position  of  the  society  and  plans  to  secure  the  Hyde  stock 
at   figures  satisfactory  to  both   Hyde  and  the  directory. 

So  important  is  the  report  of  the  Frick  investigating  committee  in  the 
annals  of    "high   finance."   as  disclosing  the    methods  used   by  men  placed  in 

tion  of  trust  to  ride  over  their  trusting  wards  with  an  easy  conscience,  that 
it  i-  given  here  nearly  in  full.  It  begins  with  a  letter  from  President  Alexander 
addressed  to  tin  committee  in  which  he  accused  .Mr.  Hyde  with  grave  irregu- 
larities  in  his  official  capacity  as  vice  president.     The  letter  read  in  part: 

"1-    Speaking  of  Mr.  Hyde,  I  proceeded  in  my  statement  to  the  committee 

twelve  to  say   that    he  has  committed  the  society   to  transactions,  positions, 

relation-,  and  agreements  without  prior  consultation  with  the  president  or  other 

officers  or   with   the  committee,   calling   the   matter  to   their  attention   only   after 

the    society    had    been    placid    in    a    position    from    which    it    was    difficult,    if   not 

—  1 1  *  1  ■  .  to  r<  <■<  de. 

"For  example,  I  mention  the  purchase  of  some  $700,000  par  value  of  bonds 

of  thi    Coney    Lsland  and   Brooklyn   Railroad  company,  the  purchase  of  1,000 

stock  of  the  Hibernia  Hank  and  Trust  company  of  New  Orleans, 

•  purchase  of  some  $1,700,000  of  the  preferred  stock  of  the  Union  Pacific 
!>:■..(].     None  of  these  transactions   was  submitted  beforehand  to  the  cxecu- 

ir   committee   should    note,    in   connection    with    these    particular   Iran, 
to   the  Coney    [sland   and    Brooklyn    railroad   bends,  that   Mr. 


THE  LIFE  INSURANCE  TRUST.  97 

Hyde  is  one  of  the  vice  presidents  of  that  company  and  heavily  interested  in 
it;  second,  as  to  the  Union  Pacific  preferred  stock,  that  at  the  direction  of  Mr. 
Hyde  it  was  entered  in  the  books  and  statement  of  the  society  of  January  1, 
1904,  as  a  'syndicate'  holding.  These  purchases  were  made  without  prior  con- 
sideration by  the  executive  committee  and  without  my  knowledge.  I  am 
informed  that   Mr.  Hyde  personally  was  a  member  of  the  syndicate. 

"Upon "inquiry  since  made  I  am  satisfied  that  this  stock  held  by  the  Equit- 
able is  the  proportionate  amount  of  stock  subscribed  for  under  the  syndicate 
agreement  by  Mr.  Hyde  individually:  that  one  of  the  conditions  of  the  agree- 
ments was  that  the  stock  shall  not  be  sold  by  the  individual  subscribers  for  a 
period  of  years  or  some  provisions  to  that  effect. 

"This  particular  transaction  evidences  two  things — the  improper  assump-. 
tion  of  authority  to  commit  the  Equitable  to  large  transactions  without  proper 
consultation  and  supervision,  and  the  making  of  the  Equitable  to  all  practical 
purposes  a  party  to  an  agreement  such  as,  in  my  opinion,  it  is  not  justified 
in  becoming  a  party  to  by  reason  of  the  fact  that  the  agreement  is  speculative 
and  binds  the  society  to  its  conditions,  which  may  not  only  become  onerous  but 
damaging  to  its  interests,  and  which  lies  entirely  outside  of  the  pale  of  per- 
missible transactions  for  an  insurance  company. 

■•<_>  Not  only  does  he  (Mr.  Hyde)  thus  disregard  the  established  check 
upon  improvidence  and  indiscretion  of  any  individual  officer,  but  he  under- 
mines the  president's  authority  behind  his  back  and  admonishes  officers  and 
subordinates  and  notifies  people  dealing  witli  the  society  to  have  their  trans- 
actions with  himself,  stating  that  the  president's  wishes,  action,  and  judgment 
in  the  matter  may  be  ignored. 

"Man\  instances  of  this  could  he  given.  Mr.  Mclntyre,  who  is  regarded  as 
the  personal  representative  and  spokesman  of  the  vice  president,  not  only  has 
carried  out  transactions  without  their  submission  to  the  president,  but  also,  on 
being  questioned  -is  to  the  president's  attitude  or  approval  of  such  transactions, 
has,  in  repeated  instance-,,  expressly  stated  in  answer  to  such  inquiries  that  it 
made   no  difference. 

Mr.   Alexander  further  stated   in   his  letter  that    Mr.   \\\(\i'  had  committed 

tin-  BOciet}  upon  hi-  nun  responsibility  to  enterprises  on  which  he  should  have 
consulted  others,  and  mentions  further  "the  extensive  purchase  of  the  stock 
of  tin  \Yw  York  Central  railroad  company,  made  under  the  urgency  and  per- 
suasion of  Mr.   Hyde  for  the  purpose  of  creating  a  basis  for  a  request  on  his 

part    tor  election   to  the  hoard   of  director-,  of   the     \e\\    York   Central." 

Continuing,  Mr.  Alexander  said: 


lis  THE  LIFE  INSURANCE  TRUST. 

"II,  i  Mr.  ll\tl<  )  has  displayed  i  strong  persona]  ambition  and  an  inordi- 
nate and  unsafe  love  of  prominence,  a  quick  responsiveness  to  flattery,  a 
pliancy  in  the  hands  of  persons  whose  interests  arc  no1  necessarily  parallel  to 
those  of  the  policyholders  of  the  society.  Tliis,  in  con  junction  with  liis  con- 
ception of  arbitrary  power  and  righl  as  the  holder  of  the  control  of  the  stock, 
renders  him  a   highly   unsafe  official."' 

\-  illustrative  iA'  the  foregoing  charge  Mr.  Alexander  gave  the  names  of 
forty  sis  corporations  in  which  Mr.  Hyde  had  procured  his  election  as  director 
and  said  thai  as  an  aid  to  his  election  in  certain  of  them  he  had  had  large 
amount^  of  stock  which  were  owned  by  the  Equitable  in  these  companies  trans- 
''.  lit  il  to  his  individual  name  and  that  he  now  appears  in  many  instances  as 
a  large  stockholder  of  record,  when,  as  a  matter  of  fact,  the  Equitable  is  the 
real   owner  of  the  stock. 

Mr.  Alexander  instanced  the  Equitable  holdings  of  stock  in  the  following 
companies,  all   standing   in  the  name  of  Mr.   Hyde: 

Long    Island    Railway    Company,    4,000    shares. 

Interborough    Railway    Company,   2,400   shares. 

The  Delaware  and  Hudson  Company,  10,000  shares,  purchased  on  August 
11.  1903,  and   placed   in  the  name  of  .lames  H.  Hyde  by  his  procurement. 

Manhattan    Railway    Company.    12,800    shares. 

\i\v    York  Central  and   Hudson   River  Railroad  Company,  12,000  shares. 

Hibernia   Rank  and  Trust  Company  of  New  Orleans,  1,000  shares. 

Pennsylvania  Railroad  Company,  10,380  shares. 

Chicago  and  Northwestern  Railway  Company,  2,900  shares  common  stock, 
;.7<»i)  shar<  -  preferred  stock. 

Chicago,  Milwaukee  and  St.  Paul  Railroad  Company,  500  shares. 

New    York.  New    Haven  and  Hartford  Railroad  Company,  3,666  shares. 

Rank  of  Montreal,  800  shares. 

First  National  Rank  of  Denver,  1,100  shares. 

Continuing,  Mr.  Alexander  said: 

"The  amounts  of  the  stock  held  by  the  Equitable  in  the  foregoing  com- 
panies may  have  increased  or  diminished  slightly  since  the  original  purchases 
from  th.    record  of  which  the  foregoing  facts  are  taken. 

I     some  of  these  companies  he  is  a  member  of  their  governing  or  executive 

ittees.      The*     positions    he    has    procured    without   consultation    with   the 

nt  of  the  society,  save  in  a  few  instances,  or  with  the  society's  executive 

aid    with    no    consideration    as    to    the    propriety    of   accepting   such 

portions,  and   the  compatibility   of  their  varied   and   extensive  duties  with  his 


THE  LIFE  INSURANCE  TRUST.  99 

work  as  an  officer  of  the  societ}  or  with  his  freedom  of  attitude  as  the  repre- 
sentative of  the  society's  interests,  [f  there  is  any  real  need  for  the  society  to 
be  represented  upon  the  boards  of  companies,  whose  securities  the  society  holds, 
that  representation  should  not  be  centered  in  one  person,  who  cannot,  by  any 
possibility,  give  proper  attention  to  the  duties  of  so  many  positions. 

"As  a  further  illustration  of  the  statements  contained  in  the  foregoing 
specifications,  I  mention  the  fact  that  he  has,  in  return  for  election  to  the 
boards  of  various  companies,  and  as  an  inducement  or  reward  for  such  recogni- 
tions by  other  companies,  displayed  a  partial  and  ready  willingness  to  extend 
to  >uch  companies  and  to  individuals  interested  therein,  pecuniary  and  other 
favors  from  the  Equitable.  On  this  subject  I  must  defer  complete  specifica- 
tion   until    reports   now   under   way   are   furnished   and   submitted  to   inc. 

-He   (.Mr.    Hyde)    has  acquired  a   wide  celebrity  and   unpleasant   notoriety 
by    reason   of   his    recreations   and   enjoyments   of  a   more   or   less    public   nature, 
which   is  exceedingly   hurtful  to  the  company,  disquieting  to  its  policy  holders, 
and  discouraging  to  its  agents.      And  this  notoriety  cannot  he  said  to  he  a  mis- 
fort  urn    that    has   overtaken    him,   because   he   has   cultivated,   striven    for    it,   and 
ii  used  the  instrumentalities  that  he  commands  in  the  society  to  achieve  it. 
"Public  coaches,  special  trains,  elaborate  banquets,  costly  and  ostentatious 
entertainments,  accompanied  a-  they  are  by  continuous  notoriety  of  a  flippant, 
trivial,  cheap  description,  are  not   only  damaging  to  the  influence  of  .Mr.   U\i\c 
as  an   officer  of   the   society    hut   are   directly    hurtful    to   the   society.      They   SUg 
gest   a  lack  of  serious  attitude  and   feeling  toward   hi-  duties  as  an  officer  of    the 
society,   a   deflection   of  the   time   and   energies    into   channels   and    pursuits    from 
which   the   society   can    gain    no  advantage  and    from    which,   on    the  contrary,   it 
ill;iv  suffer.     The}    suggest,  by  their  obvious  expensiveness,  the  possibilities  of 
enrichment   in  the  service  of  the  society,  which  should  not   exist  and  are  impos- 
sible to  explain,  and.  by  virtue  of  the  publicity  attending  his  life  these  pur- 
suits are  matters  of  notoriety  and  prove  a  serious  obstacle  to  the  success  of  the 
work  of  the  society's  agents,  upon  which  its  growth  and  vigor  depend." 

Mi.  Alexander  said  thai  Mr.  WyiU  absented  himself  from  his  ,„..i  at  leasl 
half  of  ever}  year,  spending  his  time  chiefly  in  Paris,  where  he  has  a  residence. 
Concerning  the  Cambon  dinner,  Mr.  Alexander  says  it  cbsl  $12,800,  and  that 
it  was  paid  for  by  the  socict)   without   his  knowledge.     Mr.   Hyde  in  his  letter 

turning  hack    tin    money   said   that    the  dinner  was  given   to  advertise   the  society. 
Mr.    Alexander   says    he    was    not    aware   of   tin-,   and    that    he   accepted    an    iinita 

lion  in  entire  ignorance  of  the  fact  thai   he  was  participating  in  an  advertise 


100  THE  LIFE  INSURANCE  TRUST. 

mi  nt  nl  the  company,  and  thai   lie  did  nul  learn  the  real  reason  why  the  dinner 
n  11  nt il  t wo  and  one  hall    \ ears  ago. 

II.  called  attention  to  the  fad  that  .Mr.  Hyde  was  vice  president  of  the 
M  v.mtil.  Trust  company,  at  $12,500  a  year;  vice  president  of  the  Equitable 
Trust  company,  at  $10,000  a  year,  and  vice  president  of  the  Commercial  Trust 
company  of  Philadelphia,  at  $2,500  a  vear.     Mr.  Alexander  continued: 

"1  think  the  committee  should  ascertain  whether  there  are  other  companies 
from  which  Mr.  Hyde  i>  in  receipt  of  salaries.  The  salaries  paid  to  him  by 
the  Equitable  Trust  company  and  the  Mercantile  Trust  company  are  full  pay 
i<<v  an  active  and  experienced  vice  president,  giving  his  whole  time  to  his  duties. 

"Mr.  Hyde  has  no  right  to  accept  a  position  which  necessitates  the  with- 
drawal of  any  of  his  time  or  attention  from  his  duties  as  the  vice  president  of 
the  Equitable  Life  Assurance  company. 

"Under  the  committee's  requisition  of  April  8  there  will  he  supplied  to  it 
a  record  showing  the  salaries  paid  by  the  Equitable  Life  Assurance  society  to 
the  various  employes  identified  with  Mr.  Hyde.  I  am  informed  that  there  are 
carried  upon  the  society's  pay  roll  a  number  of  persons  who  render  no  service 
to  tin  society  hut  whose  time  is  completely  taken  up  in  the  performance  of  per- 
sona] services  to  Mr.  Hyde.  I  shall  furnish  additional  details  as  soon  as 
possible    on  this  subject. 

"I  find  that  Mr.  Hyde  has  drawn  for  sundry  expenses  from  the  society 
since  January  1.  1900,  a  sum  approximating  $75,000.  These  sums  are  vari- 
ously charged  to  traveling  expenses,  sundry  expenses,  and  entertainment 
But  little  could  be  justified' on  the  score  of  traveling  expenses,  as 
Mr.  Hyde's  duties  are  in  no  wise  connected  with  the  agency  side  of  the  society's 
business,  and  I  respectfully  refer  the  subject  to  the  committee's  examination, 
a>   the   withdrawals   under  these  headings  are  obviously   excessive. 

!    ilso  have  discovered  from  recent  examinations  that   Mr.  Hyde  lias  arbi- 
trarily   raised    the    salaries    of   certain    of   the    society's   employes    without    con- 
ization    with     me    or     with     any     committee    and     without     any     semblance    of 
uthority   to  do  so.      I   instance   the   recent    increase  of   Mr.   Mclntyre's  salary 
from   $25,000   to  $30, 000   upon   Mr.    Hyde's   personal   direction;  the  salary  of 
I  I'.    Williamson,    his    personal    secretary,    from    $5,000   to   $7,200;   the 

of  th«    salary  of  W.   B.   Bramwel]   from  $6,000  to  $7,500. 

"H<     (Mr.     Hyde)    has   often     been    remonstrated    with   and    has   at    times 
aade   promises  of  more  careful   consideration   of  the  duty  of  his   relations  to 
the  society.     But   these  promises  are  soon    forgotten  and  his  mistakes  have  be- 
come more  and  more  frequent  and  aggravated. 


THE  LIFE  INSURANCE  TRUST.  101 

"His  connection  with  the  society  has  become  an  argument  used  against 
the  Equitable  by  its  competitors  and  against  which  the  society's  agents  con- 
fess  themselves  unable  to  make  satisfactory   headway. 

"I  believe  this  to  be  one  of  the  most  important  specifications  which  I  made 
in  my  statement  to  the  committee  of  the  twelve.  A  great  amount  of  evidence 
can  be  submitted  under  this  heading.  For  two  years  the  society  lias  been  in 
receipt  of  protests  that  have  come  in  increasing  frequency,  and  a  number  from 
the  agents  as  to  the  difficulties  they  experienced  by  virtue  of  Mr.  Hyde's  rela- 
tions to  the  society  as  an  officer." 

In  his  letter  Mr.  Ilvde  detailed  the  operations  of  the  syndicates  of  which 
he  was  the  chief  figure.  According  to  the  report,  "James  II.  Ilvde  and  asso- 
ciates" was  not  a  permanent  organization,  hut  changed  its  personnel  fre- 
quently. As  shown  in  Hyde's  letter,  it  conducted  a  considerable  number  of 
transactions.  In  nine  of  these  the  Equitable  became  the  purchaser  of  some  or 
all  of  the  securities  involved.  In  these  nine  transactions  securities  of  the  par 
value  of  $9,800,000  wire  handled.  The  total  profits  to  the  syndicate  on  them 
were  $204,504. 

In  tun  of  these  nine  transactions  the  Equitable  was  a  party  in  the  syndi- 
cate, receiving  $18,397.  Of  the  total  profits  $167,741  was  received  by  eight 
individuals  who  were  directors  in  the  society  and  si\  of  them  members  of  the 
exenutive  and  finance  committees.  Beside.  Mr.  Hyde,  the  members  of  the 
board  who  participated  were  V.  1\  Snyder.  II.  ('.  Deming,  (i.  II.  Squire, 
d.nnes  \Y .  Alexander.  \Y.  II.  Mclntyre,  A.  VV.  Krech,  and  Louis  Fitzgerald. 
Commenting  upon  these  transactions,  the  report  said: 

•"In  one  case  in  which  the  syndicate  profit  was  $30,210,  the  society  now 
holds  the  securities  purchased,  which  at  present  quotations  show  a  loss  of  about 
$60,000. 

"In    all    other    casts    the    society    cither    has    made    a    profit    or    could    make    a 

profit   by  selling  the  securities  at   the  present   market. 

"The  ml  result  to  the  society  of  the  purchase  of  these  syndicate  securi- 
ties has  been  a  considerable  profit.  If  the  society  had  acquired  the  securities 
by  taking  allotments  in  the  original  underwritings  to  which  the  Hyde  syndicate 
was  ;i  part}  it  would  have  made  larger  profits.  The  profits  would  have  been 
greater  bj  $186,107.  Or  if  the  society's  directors  who  figured  in  the  syndi- 
cate had  acted  -o|e|\  for  the  society  the  society's  profit  would  have  been  $167, 
"t  1 1   greater  t hat  it  h 

"In  this  course  ol  dealing  with  n  corporation  which  lhe\  were  serving  in 
positions  of  the  highest  trust  and  delicacy   these  officials  were  guilty  of  a  breach 


in-  ////    LIFE  INSURANCE  TRUST. 

of  propriety  and  a  serious  breach  of  trust,  which,  so  far  as  the  principle  of 
the  thing  is  concerned,  is  nol  mitigated  by  the  fact  that  the  society  has  lost 
nothing  by  the  transactions,  hut  is  the  gainer  by  reason  of  the  subsequent  in- 
crease in  the  market  value  of  the  securities  which  it   purchased. 

"The  committee  lias  been  advised  by  Mr.  Hyde  that  he  has  deposited 
with  the  cashier  of  tin  society  his  check  for  $61,466,  the  amount  of  his  share 
of  the  profit-  on  the  aforementioned  transactions,  with  the  request  that  the 
hoard  decide  whether  these  profits  rightfully  belong  to  himself  or  to  the  soci- 
ety. The  committee  recommends  that  the  board  inform  Mr.  Hyde  that,  in 
it-  opinion,  these  profits  wire  obtained  in  violation  of  the  rights  of  the  society 
and  that  therefore  lie  is  indebted  to  the  society  in  an  amount  equal  to  the 
profit-  in  question,  and  that  his  check  for  that  amount  will  he  placed  to  the 
credit    of    the    society. 

"The  committee  finds  as  a  fact  that  the  syndicate  operations  were  con- 
ducted a-  described  in  Mr.  Hyde's  letter  of  April  27  for  the  benefit  of  the 
persons  and  in  the  proportions  therein  named,  and  that  said  persons  received 
the  respective  amounts  detailed  by  Mr.  Hyde,  and  that  such  of  them  who  were 
director-  and  members  of  the  executive  committee  at  the  time  the  purchases 
of  -aid  securities  were  authorized  are  likewise  indebted  to  the  society  in  such 
amounts  with  interest." 

Concerning  tin  charges  made  by  Mr.  Alexander  against  Mr.  Hyde  the 
report  -aid  that  the  president  certainly  should  have  disclosed  their  nature  to 
the  hoard  of  directors  in  order  to  prevent  the  re-election  of  Mr.  Hyde  as  vice 
president  last  February.  Mr.  Alexander  knew,  or  thought  he  knew,  the  re- 
port -aid.  lone.-  before  the  annual  election  of  the  grossest  sort  of  breach  of 
duty  on  the  part  of  Mr.  Hyde,  and  though  protesting  against  his  re-election 
for  reasons  of  hi-  own.  he  failed  to  disclose  to  the  hoard  of  directors  this  breach 
•  duty,  which  would  have  been  a  sufficient  reason  for  not  re-electing  Mr. 
Hyde. 

The  report  continued: 

"Upon    Mr.    Alexander's   own    statement    of    the   misdoings  of    Mr.    Hyde 

committee  find-  that  Mr.  Alexander  was  culpably  negligent  in  acquiescing 
in  them  for  so  long  ;l  period  and  in  not  bringing  them  to  the  attention  of 
the  hoard  of  director-  at  such  time  and  in  such  a  way  a-  to  enable  the  directors 
to  consider  them  in  connection  with  the  exercise  of  their  responsible  duty  of 
electing  the  officers  of  the  society. 

"Not    only  hi-   Mr.   Alexander  concealed   from  the  directors  the  irregulari- 
Mr.   Hyde,  of  which  he  was  cognizant   and  of  which  he  now  complains, 


THE  LIFE  INSURANCE  TRUST.  103 

but  Mr.  Alexander  openly  encouraged  them.  In  >o  important  a  matter  as 
aiding  in  the  proper  conduct  of  the  examination  that  the  by-laws  of  the  so- 
ciety provide  the  fiscal  or  examining  committee  should  make  the  accounts  and 
assets  of  the  society  at  the  close  of  each  year.  Mr.  Alexander  openly  advised 
Mr.  Hyde  while  he  was  entirely  under  his  tutelage  that  this  might  and  should 
be  ignored. 

"November,  14,  1904,  Mr.  Alexander  wrote  to  Mr.  Hyde: 

"  "I  don't  know  just  when  Willie  is  to  return,  but  I  suggest,  with  your 
concurrence,  that  he  he  charged  with  the  responsibility  of  steering  the  fiscal 
committee  when  it  meets.  We  have  two  new  members  on  it,  and  it  is  just  as 
well  that  they  should  all  be  under  reasonable  observation.  Let  him  remember 
that  the  only  duty  of  this  fiscal  committee  is  to  prove  our  annual  statement. 

"  'It  is  not  their  province  to  go  into  the  management  of  the  company,  or 
to  express  opinions  about  methods.  When  they  come  to  proving  what  we  call 
our  "ledger  balances"  it  has  been  the  usage  that  the  chairman  of  the  committee 
(Mr.  Wheeloek)  should  make  the  comparisons  and  the  committee  adopt  his 
n  port.  I  shall  cross  this  off  my  memorandum,  and  you  can,  if  you  like,  lay 
it  aside  for  Willie  on  his  arrival,  unless  you  have  some  other  views.' 

"From  letters  of  Mi-.  Alexander  to  Mr.  Hyde,  which  the  committee  has 
examined,  the  committee  finds  that  he  flattered  and  encouraged  Mi-.  Hyde  in 
methods  wholly  vicious  and  tending  to  autocracy  in  the  administration  of  the 
soci<  ty'e  affairs. 

"Tin    coi ittee  also  finds  that  so  far  as  Mr.   Alexander's  charge  against 

Mr.  Hyde  is  true  namely:  'Thai  he  has  displayed  a  strong  personal  am- 
bition and  an  inordinate  and  unsafe  love  of  prominence,  a  great  responsiveness 
to  flattery,  ;i  pliancy  in  the  hands  of  persons  whose  interests  ire  not  necessarily 
parallel  to  those  of  the  policy  holders  of  the  society,'  that  Mr.  Alexander  is 
largely   responsible. 

"The  committee  finds  that  many  <>l  the  charges  of  Mr.  Alexander  against 
.Mr.    Hyde  are  true,  or  measurably   true. 

"Tin-  evidence   submitted    satisfies   the   committee: 

"Firsl  Thai  Mi-.  Hyde  has  habitually  involved  the  society  in  transac 
tions,  specially  of  purchase  of  securities,  which  were  of  great  magnitude  with 
out  tin-  previously  obtained  authority  of  the  executive  committee. 

"Second     Thai   In-  carried   large  amounts  <>l    slocks  belonging  to  the  bocj 
ety    in    his   own    name,    without    there   appearing   any    minute   of  any    act    of 
directors   or  committee   authorizing   d. 

"That   he  has  used  tin    funds  of  the  society  l<-  pa\    lor  certainly   one  social 


104  THE  LIFE  INSURANCE  TRUST. 

entertainment  given  in  his  came  and  the  aame  of  one  other  director  of  the 
society . 

"Fourth  Thai  he  shared  in  the  profits  made  by  banking  syndicates  in 
ejecting  sales  of  securities  to  the  society  at  a  time  when  he  was  a  member  of 
the  committee  which  made  the  purchase,  he  frequently  voting  for  the  same. 

"Fifth  Thai  he  has  been  guilty  of  other  acts  which  were  irregular  and 
not  in  compliance  with  the  society's  law  or  with  sound  business  practices. 

"The  committee  has  fully  considered  Mr.  Hyde's  explanations  of  these 
charges.  In  the  main  he  seeks  to  exonerate  himself  by  pleading  the  custom 
of  the  society,  the  participation  of  others,  the  return  of  money  improperly 
acquired  or  used,  and  the  beneficial  results  to  the  society.  As  it  is  the  function 
ot  this  committee  to  determine  what  is  wrong  in  the  society's  management, 
Mr.  Hyde's  arguments  cannot  avail.  The  practices  lie  has  pursued  are  wrong. 
The  fact  that  others  have  pursued  them  or  acquiesced  in  them  only  convicts 
them  of  equal  guilt."' 

Tin  report  said  that  instead  of  being  a  check  on  each  other  the  executive 
and  finance  committees  were  made  up  of  the  same  men.  A  number  of  gentle- 
men meet  and  do  certain  acts  as  the  executive  committee.  They  adjourned 
and  immediately  reconvened  as  the  finance  committee  and  approved  the  acts  of 
themselves  while  in  session  as  the  executive  committee.  For  permitting  this 
state  of  affairs  the  hoard  of  directors  was  held  responsible,  and  the  report 
recommended   that   the  two  committees  be  reorganized. 

Speaking  of  the  work  of  the  executive  committee  and  the  interesting  ques- 
tion ot'  salaries  paid,  the  report  said: 

•"There  are  no  resolutions  whatever  Hearing  on  the  salaries  of  officers  or 
others,  the  closest  approach  to  this  being  a  resolution  advising  the  directors  to 
grant     pensions     to    two     retiring      medical    directors.  In    addition      to    the 

forma!  minutes  of  the  committee  there  is  a  large  amount  of 
what  are  called  'memoranda  minutes.'  These  are  typewritten  sheets  con- 
taining a  list  of  securities  bought  and  sold,  and  it  is  assumed  that  in 
each  case  the  executive  committee  approved  of  such  transactions. 
I  executive  committee  appoints  a  subcommittee  of  two  to  adjust  sal- 
II"  i''  are  no  minutes  covering  the  report  of  such  subcommittee;  hut  it 
i-  verbally  stated  that  the  subcommittee  gave  direct  instructions  to  the  con- 
troller a-  to  the  rates  of  salaries  to  he  paid.  The  subcommittee  fixed  salaries  of 
high  itive   officers  only-  those  of  subordinates   being  arranged   by  their 

••The   last    subcommittee   on   salaries,   of      which   there   is   a     record  on    the 


THE  LIFE  INSURANCE  TRUST.  105 

minutes  (December,  1902),  was  composed  of  two  persons,  one  of  whom  re- 
ceives a  salary  from  the  society  and  the  other  a  salary  from  an  institution  in 
which  the  society  is  largely  interested.  Then'  arc  in  1905  thirteen  executive 
officers  in  the  society  who  held  the  same  positions  in  1900.  In  1900  these  thir- 
teen officers  received  salaries  aggregating  $297,000.  In  1905  the  same  officers 
received  salaries  aggregating  $448,500,  an  increase  of  $151,500,  or  51  per 
cent.  Of  the  thirteen  officers,  three  have  received  no  increase  in  salary  since 
1900.  Deducting  these,  the  average  rate  of  increase  to  the  other  ten  has  been 
61  per  cent.  The  salaries  of  six  of  the  thirteen  show  an  average  increase'  of 
86  per  cent. 

"The  salary  of  the  vice  president,  which  was  $30,000  in  1900  and  1901, 
was  advanced  to  $75,000  in  1902,  and  to  $100,000  in  1903.  The  rapidity  of 
these  Increases  in  not  only  unusual,  but  there  can  be  no  warrant  for  them 
through  any  question  of  ability  to  retain  the  officers'  mix  ices  at  lower  rates  ot 
compensation.  At  the  time  the  vice  president  received  a  salary  of  $80,000  he 
was  24  years  of  age.  When  his  salary  was  increased  to  $75,000  he  was  26 
and  when  it  was  again  increased  to  $100,000  he  was  27  years  old.  These 
facts  indicate  that  the  experience  of  the  officer  in  question  could  hardly  have 
briii  considered  a  factor  in  the  estimation  of  the  value  of  his  services.  It  is 
found  that  the  vice  president  of  the  society,  in  addition  to  holding  the  presum- 
ably purely  honorary  position  of  director  in  over  forty  corporations,  is  vice 
president  of  three  companies,  from  which  he  receives  salaries  aggregating 
$17,000. 

In  the  table  presented  showing  the  increase  of  salaries  since  1900  appears 
tin'  name  of  Anna  I..  Ajnendt,  secretary  to  Vice  President  Tarbell.  Five 
yean    ago   Bhe    was   drawing   $1,200    a    year.         In    1901    her   salary    jumped    to 

mio.  in  1903  to  $10,000,  and  this  year  to  $12,000.  The  percentage  of  in- 
increase  in  her  pay  for  the  period  covered  was  185.7.  While  on  tins  subject  the 
report    said: 

"The    wav    in    which    the    directors,    through    their   executive    committee,    and 

that    committee   through    its   subcommittee,   have   increased    the  salaries   oi    the 

principal  officers  <>f  the  society  quite  naturally  does  not  in  its  effect  end  there. 
An   examination   of  the  office   pay   rolls  shows  that    the   treatment    received   by 
each  officer  from  the  board  is  generally  reflected  in  the  treatment  accorded  by 
him   lo  bis  subordinates.      In   these  departments,  of  which   the  heads  have   re 
ceived    no   increase    in    salaries,   the   salaries   of   the   working   force   have   remained 

constant  or  have  shown  such  slight   increase  as  appeals  Id  have  been  no  more 

than   consistent    with   the  general   tendency   of  salaries   in   all    industries.      On   the 


106  l  III    LIFE  INSURANCE  TRUST. 

other  hand,  those  officers  who  themselves  have  been  rapidly  advanced  quite 
generally  have  seen  thai  their  subordinates  shared  in  their  prosperity — at  the 
society's  expense.  In  tin-  vice  president's  office  four  employes  who  received  in 
the  amrreaati  $5,4  14  in  1900.  receive  $13,900  in  1905,  an  increase  of  155  per 
cent.  In  the  second  vice  president's  office  six  employes  who  received  $10,720 
in  1900,  receive  $24,840  in  1905,  an  increase  of  182  per  cent.  The  total 
salaries  paid  to  employes  of  the  president's  office  have  increased  48  per  cent 
since  1900:  of  the  vice  president's  office  134  per  cent,  and  of  the  second  vice 
president's  office  120'  per  cent.  The  total  office  pay  roll  of  the  society  increased 
from  $770,282  in  1900  to  $1,177,501  in  1904,  or  5!}  per  cent.  As  compared 
with  this  the  total  income  of  the  society  increased  but  36  per  cent  from  1900 
to    1904. 

On  the  subject  of  making  advances  to  agents  the  report  said  that  while  the 
practice  was  almost  universal,  such  advances  never  had  been  recognized  as 
assets  by  the  insurance  departments  and  there  had  been  a  general  inclination 
on  the  part  of  most  companies  to  cease  the  practice  and  to  close  out  these  ac- 
counts   as   rapidly   as   possible. 

In  November,  1904,  the  Equitable  carried  $2,809,000  on  its  books  as  loans 
to  agents.  By  the  transfer  of  the  bulk  of  this  account  to  the  trust  companies, 
said  the  report,  it  has  appeared  as  a  much  smaller  amount  on  the  society's 
subsequent  statements.  In  the  majority  of  cases  the  amount  of  one  agent's  loan, 
which  was  carried  by  a  trust  company,  was  exactly  five  times  the  appraised 
value  of  his  annual  renewal.  The  amounts  carried  on  the  society's  books  were 
in  most  cases  sums  in  excess  of  the  fivefold  limit  accepted  by  the  trust  com- 
pani 

The  company  was  also  criticized  for  carrv'ng  excessive  cash  balances.  The 
society,  the  report  said,  is  not  subject  to  sudden  or  unexpected  called  for  un- 
usually large  sums  in  the  regular  course  of  its  business.  Yet  on  Jan.  31, 
1905,  it  had  a  cadi  balance  of  over  $29,000,000,  deposited  principally  with 
the  National  Hank  of  Commerce,  the  Mercantile  Trust  company,  and  the 
Equitable   Trust   company. 

T'uder  tin  head  of  "entangling  alliances  with  auxiliary  companies,"  the 
n  port  discussed  the  society's  interest  in  banks  and  trust  companies,  and  said, 
judging  these  investments  either  on  general  principles  or  on  specific  results, 
their   wisdom   was   "gravely  questionable." 

"In  the  remark^  under  the  heading,  excessive  cash  balances,  it  has  been 
shown  that  the  -ociety  carries  abnormal  balances  with  those  concerns  in  which 
it  hold-  a  considerabL    stock  interest,  and  the  society's  controller  says  that  the 


THE  LIFE  INSURANCE  TRUST.  107 

reason  for  this  "must  be  obvious.'  The  fact  that  the  society  does  not  carry 
excessive  balances  in  institutions  in  which  it  does  not  have  a  largo  stock  owner- 
ship indicates  that  these  large  balances  are  maintained  for  the  purpose  of 
aiding  the  concerns  with  which  they  are  deposited. 

"In  making  these  investments  the  society  is  concerned  not  merely  in  the 
amount  it  realizes  in  dividends  as  constituting  a  proper  return  on  the  invest- 
ment, but  becomes  actively  engaged  in  the  building  up  of  the  auxiliary  con- 
cern  in  order  to  show  appreciation  in  market  value  of  the  original  investment. 

"Having  been  committed  to  such  a  policy  complications  increase,  which 
force  the  society  away  from  the  position  of  an  investor,  which  it  should  oc- 
cupy, into  that  of  a  promoter  and  manipulator,  which  it  should  not  occupy. 
Under  date  of  Aug.  80,  11)01.  President  Alexander  wrote  to  J.  II.  Hyde: 

"  *I  am  glad  you  watch  the  bank  and  that  it  is  doing  so  well,  but  we  must 
perform  some  coup  and  increase  iN  size  and  importance.  Also  in  the  case  of 
the  .Mercantile.  I  would  like  to  buy  a  couple  of  trust  companies  and  double 
up  that  concern.' 

"It  seems  needless  to  state  that  the  making  of  'coups'  to  enlarge  banks  or 
the  buying  of  trust  companies  are  not  proper  subjects  of  concern  to  a  life  in- 
insurance  company  ."' 

Tin  report  >aid  that  the  society  should  purchase  neither  bonds  nor  stock< 
which  would  require  manipulation  or  nursing.  It  should  make  no  purchases  oi 
securities  where  their  subsequent  sale  could  ever  be  inadvisable  for  any  other 
reason  than  genera]  market  conditions.  In  other  words,  it  should  be  a  life 
insurance  company. 

On  the  subject   of  deferred  dividend  policies  the  report   said: 

"The     Equitable,    in    common    \s  it  1 1    several    others    of    the    large    companies. 

issues  the  greater  portion  of  its  policies  on  the  deferred  distribution  period 
plan.  Under  this  system  the  excess  portion  of  the  premium  is  not  returnable 
to  the  policy  holders  annually,  but  is  retained  b\  the  society  for  various 
stipulated  period  of  years  (usually  twenty  years),  and  the  accumulations  then 
paid  in  one  sum.  The  advantage  which  is  In  Id  out  to  the  policy  holder  under 
this  system  is  that  he  not  only  eventually  receives  all  tin'  natural  accretions  of 
his  own  policy,  hut  shares  of  those  which  were  earned  by  the  policy  of  those 
who  were  unable  to  continue  them  to  the  end. 

"The  question  as  to  the  ethics  of  extending  tin-  hope  of  one  policy  holder 
that  hi-  prosperity  will  be  increased  through  tin  misfortune  of  another  policy 
holder  i>  punk  academic  and  need  not  be  discussed  lure.  As  each  policy 
holder   understood    the  conditions  and   accepted   them   with   the    hope    that    he 


[08  THE  LIFE  INSURANCE  TRUST. 

would  be  in  the  fortunate  class,  he  seemingly  would  be  estopped  from  com- 
plain!  if  events  forced  him  into  the  unfortunate  class. 

"But,  entirely  aside  from  this  question,  as  between  the  individual  policy 
holders,  there  can  be  no  doubt  concerning  the  at  least  potentiality  of  evil  which 
this  Bystem  of  deferred  distribution  possesses. 

"When  annual  dividends  are  paid  the  policy  holder  has  an  immediate  and 
yearly  recurring  cluck  upon  the  operations  of  his  company.  He  is  enabled 
and  is  quite  apt  to  compare  his  results  with  those  of  his  acquaintances  insured 
in  other  companies.  Extravagance  in  managemeni  and  errors  in  investments 
are  at  once  reflected  in  decreased  dividends  or  impaired  surplus. 

'•On  the  other  hand,  the  holder  of  a  twenty-year  distribution  period  policy 
ha-  no  knowledge  whatever  concerning  the  earnings  of  his  policy  until  the 
expiration  of  the  twenty  years.  Hi-  cannot  make  comparisons  with  the  re- 
sults in  other  companies  because  he  does  not  know  the  results  in  his  own  case. 
lb  entertains  hope  for  nineteen  years,  and  if  dissatisfied  with  the  realization 
at    the   end    of   twenty    years    it    is    futile    for   him   to   protest.      The   incident   is 

closed. 

"These  condition-  are  mentioned  for  this  purpose — to  illustrate  the  pos- 
sibility of  deterred  distribution  policy  leading  the  society  into  a  generally  lax 
method  of  doing  its  business.  The  annual  dividend  company  is  held  to  ac- 
countability every  year.  The  deferred  dividend  company  is  never  held  to  ac- 
countability by  the  bodv  of  it-  policy  holders  and  is  so  held  by  its  individual 
policy    holder-   only    when   their  Opportunity    for  action   has  passed. 

"Tin-  absence  of  accountability  makes  possible  the  pursuit  of  rapidity  of 
growth  at  undue  cost,  because  the  effect  of  that  cost  is  not  felt  by  the  policy- 
holder until,  a-  -aid  before,  it  is  too  late  for  his  availing  protest.  Another 
embarrassing  outgrowth  from  the  deferred  dividend  system  is  the  popular 
misapprehension  of  tin    so-called  surplus." 

Th»  society's  published  report  -hows  a  surplus  on  Dec.  31,  1904,  of  $80,- 
'.  and  popular  sentiment  demanded  that  this  sum  be  divided  among  the 
policy  holder-.  There  was  even  seen  a  discussion  of  the  ownership  of  the 
surplus  a-  between  policy  holder-  and  stockholders.  As  a  matter  of  fact,  the 
actual  surplus  of  the  society  on  Dec.  31,  1904,  was  approximately  ^10,200,- 
000.  Of  the  balance,  $6,750,000  was  apportioned  for  dividends  payable  in 
190.",.  and  $63,800,000  was  merely  as  reserve  against  future  contingenl 
liability.  That  i-.  it  was  the  amount  which  had  been  earned  by  the  total  number 
of  deferred  dividend  policies,  and  which  becomes  a  direct  liability  as  each 
individual   policy  matures. 


THE  LIFE  INSURANCE  TRUST.  109 

"The  soliciting  agents  of  those  companies  which  write  almost  exclusively 
deferred  dividend  policies  habitually  state  that  the  superiority  of  that  form  of 
policy  is  demonstrated  by  the  fact  that  the  public  invariably  selects  it  in 
preference  to-  the  annual  dividend  policy.  As  bearing  on  this  statement  it  is 
of  some  interest  to  know  that  the  Equitable  society  allows  its  agents  commis- 
sions and  expenses  of  50  per  cent  of  the  first  premium  on  deferred  dividend 
policies,  while  it  allows  them  but  25  per  cent  on  annual  dividend  policies. 

"The  general  policy  of  the  society  having  been  diverted  from  its  true 
course,  it  is  hardly  to  be  wondered  at  that  there  is  found  throughout  its  offi- 
cial personnel  a  sort  of  moral  obliqueness — a  condition  where  personal  gain 
seems  at  times  to  be  the  paramount  idea.  It  is  this  which  has  led  your  com- 
mittee to  find  that  the  society's  transactions  with  outside  concerns  have  been 
placed  so  systematically  that  the  profits  fall  into  the  hands  of  those  closely 
connected  with  the  society's  officers,  and  it  is  this  which  has  led  the  officers  of 
tin-  society  to  say  with  undoubted  sincerity  that  they  saw  no  wrong  in  accept- 
ing profits  from  syndicate  transactions  in  which  the  society  played  an  im- 
portant   part." 

Concerning  the  directors  the  report  said: 

"First-  That  the  title  of  the  great  majority  of  the  board  to  their  office 
as  directors  is  open  to  question  under  the  law  of  the  society  by  reason  of  the 
fact  that  the  shares  of  slock  held  by  them  were  transferred  to  them  for  the 
purpose  of  qualifying   them   as  directors. 

"Second  That  this  practice  of  qualifying  directors  is  almost  coeval  with 
the  existence  of  the  society  itself,  and,  further,  that  there  has  not  been  a  time 
for  years  when  there  were  enough  male  stockholders  in  the  corporation  owning 
(i\.  shares  of  stock  to  constitute  the  number  of  directors  required  by  the 
charter,  indeed  at  the  present  date,  not  more  than  half  enough  for  that  pur- 
pose. 

"Three      Tliat    the   directors,    in    whom    the    corporate    powers   of   the   societ  \ 

are  vested  l»\    its  charter,  created,  by  the  by  laws,  certain  committees  and  offi 
ceis  to  whom  the  directors  delegated  the  exercise  of  substantially  all  the  powers 
of  tin    society.     The  committee  further  finds  that   the  relation  of  the  board  of 
directors   to  the  exercise  of  the  society's   powers  has  been   practically   nominal 
since  the  establishment   of  the  society. 

'■fourth  Thai  the  directors  are  responsible  for  constructing  the  executive 
and  finance  committee  of  the  same  persons  (except  one),  thus  destroying  the 
check  upon  and  the  supervision  over  the  executive  committee  which  the  by  laws 


HO  THE  LIFE  INSURANCE  TRUST. 

provide  shall  be  exercised  l».\  the  finance  committee.  The  committee  recom- 
mends the   reorganization   of   these  committees. 

"Fifth  '11i.it  the  minutes  of  the  proceedings  of  the  executive  committee 
have  not  been  kepi  in  the  manner  provided  l>.\  the  by-laws,  and  that  in  the  con- 
duet  of  its  business  there  has  been  a  marked  absence  of  that  formality  which 
is  proper,  if  not  essential,  in  dealing  with  a  trust  of  such  greal  magnitude. 

"Sixth  That  the  members  of  the  executive  committee  named  in  Mr. 
Hyde's  Utter  to  the  committee  of  April  27,  1905,  participated  with  Mr.  Hyde 
in  the  profit-  of  the  syndicates,  detailed  in  said  letter,  and  are  justly  indebted 
to  tli.'  society    for  the  amount    of  said   profits." 

The  report  summed  up  the  ease  against   Mr.  Alexander  as  follows: 

"As  to  the  president  of  the  society  the  committee  finds  that  he  concealed 
from  the  hoard  of  directors  his  knowledge  of  the  irregular  conduct  of  the  vice 
president  in  relation  to  the  society's  affairs  at  times  when  the  vice  president 
was   a   candidate    for   re-election,   and   that    the    president   had  knowledge   of   the 

gularities  to  the  extent  that  the  committee  finds  they  existed  and  that  many 
of  these  irregularities  were  openly  encouraged  and  participated  in  by  the  presi- 
dent." 

The  committee  also  finds  that  Mr.  Alexander  participated  in  the  profits  of" 
the  syndicates  and  that  he  is  justly  indebted  to  the  society  for  the  amount 
thus  secured  by  him.  As  for  Mr.  Hyde,  the  committee  finds  that  "he  habitu- 
ally involved  this  society  in  transactions  of  great  magnitude  without  previous- 
ly obtaining  authority  of  the  executive  committee;  that  lie  carried  large 
amounts  of  stock  belonging  to  the  society  in  his  own  name  without  first  having 
secured  the  authority  of  the  society:  that  he  used  the  funds  of  the  society  to 
pay   for  tin-  'Cambon  dinner   (which  he  subsequently  returned). 

•I  also  finds  he  conducted  and  participated  in  the  profits  of  the  syndicates 
described  in  his  letter  of  April  27,  1905,  having  frequently  as  a  member  of 
the  executive  committee  voted  for  the  purchase  of  such  securities  as  shown  in 
said  litter  in  detail:  that  he  is  indebted  to  the  society  to  the  amount  of  the 
profits  he  has  received  as  shown  by  his  letter,  and  that  he  has  heen  guilty  of 
other  irregular  acts,  irregular  in  tin  sense  that  they  are  not  in  accordance  with 
iety's  law,  or  with  sound  business  practices,  treating  the  society  and  its 
affairs  largely  as  if  they  were  his  own  personal  concerns." 

In    conclusion    the    report     said: 

"As   to   the  other  officers   of  tin'   society   the  committee  finds  that  a  general 

-    prevailed    in    the   administration    of   the   society's   affairs,   requir- 

prompt  and  thorough   rectification,  and   that  there  is  a  general  lacking  in 


•  THE  LIFE  INSURANCE  TRUST.  Ill 

the  organization  of  the  strong  moral  fiber  so  essential  for  the  accomplishment 
of  satisfactory  results. 

''The  committee  also  finds  that  the  society's  methods  of  doing  business  are 
unsystematic  and  should  be  corrected;  that  the  cash  balances  carried  by  the 
society  are  excessive;  that  the  society's  alliances  with  financial  institutions  are 
unnecessary  and  undesirable  in  the  conduct  of  its  legitimate  business;  that  its 
advances  to  agents,  directly  and  through  financial  institutions  in  which  the 
society  is  interested,  are  excessive  and  that  the  society's  efforts  should  be 
directed  to  conducting  a  strictly  legitimate  life  insurance  business  at  the  lowest 
cost  to  the  insured  along  the  general  lines  hereinbefore  indicated. 

"The  imperative  need  in  this  and  all  other  similar  associations  is  a  more 
lively  sense  of  the  true  nature  of  the  relations  existing  between  the  society  and 
the  assured  and  of  the  duties  owing  by  the  management  to  both. 

"When  we  consider  that  the  fabulous  accumulations  held  by  such  associa- 
tions represent  a  voluntary  tax  placed  by  the  provident  upon  their  lives,  and 
when  we  recall  the  tremendous  self-denial  and  sacrifice  that  is  represented  in 
daily  living  to  secure  provision  against  the  inevitable,  then  we  begin  to  realize 
the  high  and  delicate  nature  of  the  trust  involved  in  the  administration  of  such 
a   fund. 

"Every  economy  consistent  with  sound  administration  and  norma]  progress 
should  be  practiced.  Excessive  salaries,  excessive  committees,  excessive  ex- 
penses,   iiul  superfluous  offices  should  not  he  tolerated. 

"Investments  should  be  carefully  made  and  all  the  useful  formal  precau- 
tions employed  to  insure  the  location  of  the  moral  responsibility  of  the  officers 
■a  Iki  an-  charged   with  the  duty  of  making  them. 

"Tin'  committee  having  pursued  its  investigation  of  the  present  manage- 
ment of  tin-  society  sufficiently  far  to  convince  it  that  the  personnel  of  the 
managemenl  should  be  radically  changed  and  the  methods  of  conducting  the 
busine8S  Of  the  BOciety  brought  back  to  sound  legal  and  ethical  lines,  begs  to 
be  relieved   from   further  duty. 

"The  committee  desires,  however,  to  recommend  that    further  investigation 

as   indicated   in   its  chairman's   letter  of  April   8,   to   Mr.    Alexander  be   proceeded 

with  by  a  reorganized  management,  whose  immediate  connection  with  tb" 
source  of  information  for  the  work  and  personal  responsibility  for  the  future 
will  enable  it   to  conduct   the  investigation  more  thoroughly,  expeditiously,  and 

Satisfactorily  than  it  would  be  possible  for  the  committee  to  do.  The  coinmit- 
tei  also  recommends  that  Ihi'  new  managemenl  have  a  thorough  audit  made 
of  all    the   society's   honks   and    records. 


US  llll    I  III'  INSURANCE  TRUST. 

"It  other  irregularities  in  the  present  management  are  brought  to  light 
they  will  be  only  cumulative  and  therefore  could  not  affect  one  way  or  the 
other  the  finality  o\   the  conclusion  expressed  above. 

"The  extraordinary  powers  of  the  principal  officers  of  the  society  carry 
with  them  the  highest  measure  of  responsibility.  The  committee  finds  that  of 
these  the  president,  vice  president,  and  the  second  vice  president  have  fallen  far 
short  of  their  duty  both  in  acts  of  commission  and  omission,  and  changes  in 
these  offici  s  should  be  made. 

"The  loose  and  irregular  methods  obtaining  in  the  management  are  largely 
due  l>oth  to  the  example  of  the  acts  and  the  example  of  the  neglect  of  these 
officers.  The  shortcomings  of  inferior  executive  officers  are  largely  due  to  the 
methods  which  the  principal  officers  have  encouraged  or  permitted,  and  so  far 
orrection  of  these  irregularities  calls  for  further  removals  of  officials  that 
matter  should  be  dealt  with  and  largely  controlled  by  the  judgment  of  the  re- 
sized  management." 

When   the   public  and   the  financial   world  had  digested  the  contents  of  this 
report  and  had  received  intimations  of  the  possible  bursting  of  a  thunder-cloud 
when   Superintendent   Hendricks  of  the   New   York  state  insurance  department 
should  make  known  the  result  of  his  investigations  into  the  Equitable  scandal, 
financii  rs   found   it   necessary  to  inaugurate  sweeping  reforms.     For  that  pur- 
Paul    Morton,    Secretary    of   the    Navy    under    President    Roosevelt,   was 
ted   to  the  position  of  chairman  of  the  board  of  directors  with  full  author- 
ity to  reorganize  the  society.    Immediately  afterward  it  developed  that  Thomas 
F.   Ryan,  head  of  a  powerful  clique  of  New  York  stock  market  operators  and 
trust  magnates,  had  bought  control  of  the  Equitable  through  acquiring  James 
II.    Hyde's   stock    for   $2,500,000.      Severe  criticism  arose  over  this  maneuver, 
for  the  Tobacco   Trust,  of   which   Ryan   was  a   prime  mover  but  a  short  time 
re,    had    been    watered    to   the   extent    of   $34,000,000.      Furthermore,  the 
Ryan    interests    had    great    plans   on    foot    for   building   new   subways   in   New 
.  and   Paul  Morton  had  been  secured  originally  by  Ryan  to  manage  these 
I-    was   supposed   somewhat   generally  that  the  purpose  of  Ryan's  pur- 
*    the   control   of  the   Equitable  was   to  give  him  greater  power  in  the 
cial  world.     And  indeed  the  coup  did  thi>. 

But    Ryan   at    oner   executed   a   trust   i\wi\   by   which   Ex-President   Grover 

land,  George  Westinghouse  and  Judge  M.  J.  O'Brien  were  made  trustees 

for  the  purpose   of  voting  Ryan's  stock  for    the    best    interests   of   policyholders 

any.     Mr.  Cleveland,  in  his  letter  of  acceptance  of  the  trusteeship, 

struck  the  keynote  of  the  "square  deal"  when  he  said,  "I  cannot  rid  myself  of 


THE  LIFE  INSURANCE  TRUST.  113 

the  belief  that  what  has  happened  to  this  company  is  liable  to  happen  to  other 
insurance  companies  and  fiduciary  organizations  as  long  as  lax  ideas  of  responsi- 
bility in  places  of  trust  are  tolerated  by  our  people.  The  high  pressure  of 
speculation,  the  madness  of  inordinate  business  scheming  and  the  chances 
taken  in  new  and  uncertain  enterprises  are  constantly  present  temptations,  too 
often  successful,  in  leading  managers  and  directors  away  from  scrupulous  loy- 
alty and   fidelity  to  the  interests  of  others  confided  to  their  care. 

"We  can  better  afford  to  slacken  our  pace  than  to  abandon  our  old  simple 
American  standards  of  honesty:  and  we  shall  be  safe  if  we  regain  our  old  habit 
of  looking  at  the  appropriation  to  personal  uses  of  property  and  interests  held 
in  trust  in  the  same  light  as  other  forms  of  stealing.** 

While  the  fad  that  the  law  prevented  dividends  of  more  than  7  per  cenl 
to  be  paid  on  the  stock  of  the  Equitable  caused  many  interested  and  disinter- 
ested persons  to  wonder  why  Mr.  Ryan  had  invested  such  a  great  amount  of 
money  for  $50,000  worth  of  stock,  the  public  had  to  assume  that  the  $2,500,- 
000,  which  was  only  a  small  percentage  of  the  Ryan  fortune,  was  paid  to 
Hyde  for  the  sake  of  preserving  order  in  financial  circles.  Such  fear  of  every 
action  by  prominent  men  of  business  had  spread  among  the  people  that  there 
was  dread  among  the  men  of  money  that  the  public  might  believe  that  all  busi- 
riess  transactions  were  more  or  less  tainted  with  downright  dishonesty.  Even 
the  Ryan  purchase  of  the  Hyde  stock  did  not  quell  this  feeling  of  unrest,  for 
tin'  Ryan  interests  had  been  so  prominent  in  Wall  Street  affairs  that  it  was 
supposed    this   transaction    was  of  the   usual   sort. 

Whether  it  shall  prove  to  have  been  philanthropic  and  meant  honestly  to 
-'tile  a  serious  difficulty  without  further  disturbance  remains  to  be  seen  from 
future  developments.  It  seems  likely,  however,  that  hereafter  government 
investigation   of   insurance  officials  will   be  more  thorough  and   more  frequent. 

It  seems  also  that  the  brand  of  dishonor  has  been  placed  upon  all  financiers 
who    gain     pecuniary    advantage'    through    sharing    in     underwriting    syndicate- 

which    profit     from    Sale8    of    securities    to    C panics    of    which    the    members    are 

trustees  or  directors.  Probably,  also,  insurance  directors  will  be  more  careful 
in  the  future  about  making  such  financial  alliances  as  purchasing  the  majority 
of  the  -lock  of  ;i  bank  or  trust  company,  which  in  turn  shall  do  a  banking 
business  on  the  funds  of  the  insurance  policy  holders  to  the  detriment  of  their 
besl     interests.        In    a     phrase,    it     would    SCem    that,    scandalous    as    the    disclosures 

were  in  connection  with  (Ik    Equitable  embroglio,  they  have  resulted  in  helping 

to    restore    thai     old     American    standard    of    honest  \     for    u  hicli     Mr.    Cleveland 

argued  and  for  which  the  Roosevell  doctrine  of  the  "square  deal"  stands. 


THOMAS    W.    LAWSON, 
Of  Amalgamated  Copper  fame,  and  whose  arti- 
Frenzled  Finance"  have  cre- 
■  i   world-wide  Interest. 


BEV.    DR.    WASHINGTON     GLADDEN, 

Noted  lecturer  on  .Municipal  Reform  and  who 
objects  to  the  Rockefeller  gift  to  the  Con- 
gregational Church  for  foreign  missions, 
referring   to   it    as    "tainted   money." 


STEPHEN    GIRABD, 
Founder   of    Girard    College,    Philadelphia       In 

a    $5."  an,    Girard  to    the    front 

and    subscriber]    for    the    whole    amount        He 
drew   his   own   will,   covering   :;•;    large    printed 

Oil] 


ANDREW     CARNEGIE. 
He    st  rted     i"    work    when    11    years    old, 
earning  $1.20  per  week,  and  is  now  believed  to 
.,     (200,000,000.00  apart    from   the  more 
(100,000,000.00   he  has   given  away. 


CHAPTER    VII 
STANDARD  OIL. 

The  Operations  of  "Standard  QU"  as  a  Financial  System  Are  an  Hundred 
Times  as  Important  as  the  Actual  Oil  Business  of  that  Concern — Wealth  of 
the  Rockefellers — "Standard  Oil"  Influence  Openly  Recognized  in  the 
Management  of  Nearly  Sixty-five  per  cent  of  the  Total  Railway  MUeagt 
of  the  United  States. 

If  a  vote  were  taken  throughout  the  length  and  breadth  of  this  fair  land  on 
the  question  of  what  single  power  exerts  the  greatest  influence  in  the  husincss 
affairs  of  the  country,  it  is  probable  the  unanimous  verdict  would  he  "Standard 
Oil."  And  unquestionably,  taken  in  its  broadest  sense,  this  would  he  well 
a  it hin   the  truth. 

But  there  are  two  distinct  and  different  entities  which  operate  to  pile  up 
it  hordes  of  wealth  under  the  cloak  of  this  cabalistic  name.  One  is  simply 
that  world-famed  corporation,  the  Standard  Oil  company,  which  i>  supposed 
t<>  enjoy  the  monopoly  of  the  oil  business  of  tin-  world,  through  the  ownership 
or  leases  of  oil  wells,  the  operation  of  pipe  lines  to  carry  oil  from  the  wells  to 
the  refineries,  and.  after  the  refining  process,  the  working  and  control  of  tank 
line  cars  and  -hips  to  carry  the  product  to  market.  The  other  "Standard 
Oil"  is  not  a  company,  nol  even  a  legal  partnership,  hut  a  body  of  men,'  a 
Bystem,  vrhose  interests  are  closely  interrelated  with  those  of  the  Standard  Oil 
company. 

L<  t     u>    examine    into    the    workings    of    both    these    kinds    of    Standard    Oil 

And  because  of  the  greater  influence  now   exerted  on  every   phase  of  business 

and    public    life,    lei    US    consider    first    that    "Standard    Oil"    wliicli    now    does    not 
make   its   chief   business    that    of  dealing   in   oil,  hut    which    through    haying  first 
made  a  great  success  in  oil  was  able  to  draw  into  its  ranks  the  greatest   busi 
nesi  linn  of  the  age  and   thereby  becomes  the  most    powerful   influence  known 
in  banking,  speculation,  promotion,  mining,  etc.     This  influence,  if  one  i-  to 

it    a    name   Other    than    Standard    Oil.    is    known    as    "Rockefeller."   after    the 

head  and  brains  of  fhe  gre.it  aggregation  of  capital,  John  I).  Rockefeller. 

This  aggregation,  which  we  will  call  the  Rockefeller  interest-,  although  it 
is  known   .'ind   spoken  of  in   Wall   street    and  elsewhere  as  "Standard   oil,"   is 

115 


11,;  STAND  //.'/>   OIL. 

made  up  chiefly  of  the  officers  of  the  Standard  Oil  company.  These  are  John 
D  Rockefeller,  William  Rockefeller,  Henry  II.  Rogers,  W.  H.  Tillford, 
Charles  M.  Pratt,  John  1).  Archbold,  Henry  M.  Flagier,  Oliver  II.  Payne, 
I  \\ '.  Harkness,  F.  Q.  Barstow,  J.  A.  Moffett,  Walter  Jennings  and  E.  T. 
Bedford. 

While  these  oilier-  of  the  Standard  Oil  company  do  not  all  enter  actively 
into  the  outside  financial  operations  of  the  Rockefeller  interests,  there  are 
several  other  men  who  do  act  as  important  principals  and  agents  with  John  D. 
Rockefeller,  although  they  arc  not  on  the  official  roll  of  the  Oil  company. 
These  are  John  1).  Rockefeller,  Jr.,  and  E.  Parmelee  Prentiss,  son  and  soh-in- 
lau  respectively  of  John  1).  Rockefeller;  William  G.  Rockefeller,  son  of 
William  Rockefeller  and  nephew  of  the  head  of  the  house,  and  James  Stillman, 
president  of  the  National  City  (or  Standard  Oil)  hank.  Of  these  the  most 
influential  are  John  I).  Rockefeller,  William  Rockefeller,  his  brother,  H.  H. 
Rogers  and   James  Stillman. 

far-reacliing  is  the  influence  of  this  great  party  of  capitalists — to 
which  is  limited  that  described  as  the  "money  trust" — that  the  business  world 
long  since  has  Income  used  to  the  modern  proverb  of  "Scratch  a  banker  and 
you  "ill  find  Standard  Oil  beneath."  As  is  well  known,  and  as  will  be  shown 
in  detail  later,  there  is  a  great  influence  in  the  control  of  nearly  all  the  oil 
industry  oi  America  and  of  much  of  that  of  other  continents.  When  this  oil 
business  became  so  successful  that  great  wealth  accumulated  for  the  men  in 
the  oil  trust,  it  \\a>  necessary  to  invest  the  wealth  in  other  enterprises  to  keep 
it  employed.  This  caused  the  Rockefellers  to  search  out  the  most  profitable 
investments  and  business  alliances  in  the  world.  The  nature  of  the  oil  business 
itself  brought  affiliations  with  railways,  steamship  companies,  banks,  etc. 
Gradually  many  of  the  companies  into  which  the  Rockefellers  embarked  were 
absorbed  entirely  by  the  wealth  of  the  family  and  of  its  allies. 

Of   the   shrewd   character  of  these    men     the    best     testimony   is  borne  by 
William  II.  Vanderbilt,  who  said  before  a  government  investigating  committee: 

••I  never  came  in  contact  with  any  class  of  men  as  smart  and  able  as  they 
are  in  their  business,  and  I  think  that  a  great  deal  of  their  advantage  is  to  be 
attributed  to  that.  They  never  could  have  got  in  the  position  the}'  are  now  in 
without  a  good  deal  of  ability,  and  one  man  would  hardly  have  been  able  to  do 
it.  It  (the  Standard  Oil  compan\  )  i>  a  combination  of  men.  I  don't  believe 
that  by  any  legislative  enactment  or  anything  else,  through  any  of  the  states, 
or  all  of  the  states,  you  can  keep  such  men  down." 

I        head  of  the  great   party  to  which  such  tribute  is  paid,  John  Davison 


STANDARD   OIL.  117 

Rockefeller,  was  born  in  1839,  in  Richford,  Tioga  County,  New  York,  of 
parents  of  only  moderate  means.  When  twelve  years  of  age  his  parents  took 
him  to  Cleveland,  Ohio,  where  he  had  a  public  school  education,  and  at  sixteen 
he  became  a  clerk  in  a  commission  house.  In  1858  he  embarked  in  the  com- 
mission business  for  himself  with  a  partner  named  Clark.  Both  were  clever  at 
driving  bargains  and  their  success  was  immediate.  In  1862  they  became 
acquainted  with  Samuel  Andrews,  an  expert  oil  refiner,  and  under  the  name 
of  Andrews,  Clark  &  Co.,  engaged  extensively  in  the  oil  business.  William 
Rockefeller,  his  brother,  was  admitted  to  partnership  and  a  new  concern, 
William  Rockefeller  &  Co.,  was  formed,  which  built,  in  1865,  a  Large 
refinery  at  Cleveland,  Ohio,  known  as  the  Standard  Oil  Refinery.  This  was  the 
nucleus  of  the   great    Standard  Oil   company   of  today. 

In  the  intervals  of  a  busy  career,  J.  1).  Rockefeller  devoted  a  part  of  his 
time  to  religious,  benevolent  and  educational  institutions,  particularly  those 
connected  with  the  Baptist  Church.  In  1892  he  founded  and  endowed  the 
University  of  Chicago,  known  officially  as  "The  University  of  Chicago, 
Founded  by  -John  D.  Rockefeller."  By  1905  he  had  given  more  than  $6,500,- 
()()()  to  this  Institution.  He  also  gave  largely  to  other  institutions.  His  gifts 
for  education,  which  in  the  aggregate  amount  to  a  greater  sum  than  has  ever 
been  contributed  before  by  a  single  person  to  such  purposes,  generally  have 
been  conditional  upon  the  raising  of  a  similar  amount  by  the  institution  bene- 
fited. 

Because    <>f    the    widespread    belief    that    the    trust    methods    of   today    are 
list    fair  and  square  dealing,  and  because  Mr.   Rockefeller's  great  corpora- 
tion,  the    Standard    Oil    company,    violated    the    doctrine   of    equal    rights    for    all 

and  the  other  "Standard  <)il"  power,  now  called  the  "system"  by  some  writers, 
repeatedly  has  abused  public  confidence  and  good  public  policy,  greal  criticism 
againsl   this  multi-millionaire  and  his  methods  of  making  money  arose. 

Its    most    outspoken     form    was    that     which    followed    the    offer    of    a    gifl    of 

$100,000  by  John   I).   Rockefeller  to  the  American   Hoard  of  Missions  of  the 

Congregational  church  of  this  country.  At  the  lime  this  offer  was  made  so 
many    charges    of    violation    of    justice,    if    not    of    law,    on    which    criminal    pro 

ceedings  could  be  made,  were  being  uttered  againsl  the  Rockefellers,  the 
Standard  Oil  company  itself  :iud  John  D-  Rockefeller  as  chief  of  this  mighty 
coalition  of  money,  natural  resources  and  special  privileges,  thai  a  protest 
arose  againsl  the  acceptance  of  th<  will.  II  had  not  been  supposed  that  such 
a  protesl  ever  would  .'iris,  ami  even  aboul  half  of  tin  monej  had  been  spent 
before  the  prolyl   was  filed.     II   was  charged  that   the  m \    never  rightfullj 


lis  STANDARD   oil.. 

belonged  to  Mr.  Rockefeller,  though  he  had  secured  it  Legally.  Hence,  accord- 
ing to  the  protestations,  I  Ik-  monej  king  had  no  right  to  give  it  away.  Some 
of  the  unjusl  methods  used  in  the  acquirement  of  this  money,  according  to  the 
protests  made  againsl  receiving  the  gift,  which  finally  was  accepted,  were 
"despoiling  citizens  of  their  honest  gains  and  shutting  the  doors  of  opportu- 
nity upon  them";  "injustice  and  oppression";  "illicit  and  iniquitous  control  of 
railways";  "shameful  prostitution  of  agencies  created  by  public  law  for  the 
public  service,"  etc. 

The  chief  objector  to  the  gift  was  the  Rev.  Dr.  Washington  Gladden, 
moderator  of  the  National  Council  of  the  Congregational  church  and  pastor  of 
the  First  Congregational  church,  Columbus,  ().  His  characterization  of  the 
methods  of  the  trusts  is  so  typical  of  the  age  that  it  follows  in  full: 

"R<  garding  my  position  as  to  the  Rockefeller  gift  to  our  board  of  missions, 
it  should  be  understood  at  the  outset  that  I  am  not  authorized  to  speak  for 
the  denomination  to  which  I  belong.  I  possess  no  shadow  of  authority.  My 
word  is  worth  just  as  much  in  the  councils  of  my  denomination  as  the  truth 
and  reason  it  contains  give  to  it,  no  more. 

••(>n  the  other  hand,  I  do  not  consider  myself  debarred  by  the  position  I 
hold,  from  the  clear  expression  of  my  convictions  upon  any  important  question 
of  public  morals,  even  if  that  question  touches  nearly  the  life  of  the  Congre- 
gational churches.  My  first  obligation  is  not  to  these  churches,  but  to  the 
kingdom  of  God. 

"I  oppose,  and  shall  continue  to  oppose,  the  acceptance  and  use  of  the  gift 
of  .Mi-.  Rockefeller  for  several  reasons. 

".John   I).   Rockefeller  is  the   responsible  representative  of  the  system  known 

Standard  Oil.  This  system,  to  say  nothing  worse  of  it,  is  convicted,  by  a 
ma--  of  testimony  which  it  is  puerile  to  dispute  or  ignore,  of  using  its  vast 
power  in  the  most  unscrupulous  ways  to  crush  competition  and  to  build  up 
colossal    fortunes  on   the   ruins  of  happy   homes  and   holiest    industries. 

'"Anything   more   hostile   to   the   whole   genius   of   the   Christian    religion    than 

tin-  career  of  this  enterprise  it  would  be  difficult  to  conceive.      It  has  done  what 

t  could  to  reduce  business  to  brigandage.     Espionage,  bribery  of  the  employes 

of    competitors,    and    all    other    underhanded    methods    have    been    its    constant 

•m-. 

"I".  e  case  is  worse  than  this.     The  Standard  Oil  could  never  have  gained 

-  power  to  oppress  but  for  it-  alliance  with  the  railways.  From  the  begin- 
ning of  i  -  career  it  has  been  able  to  coerce  the  railways  into  the  most  humili- 
ating submission  to  its  behests.     By  a  system  of  rebates  of  the  most  astonish- 


STANDARD   OIL.  119 

ing  injustice,  it  forced  the  great  trunk  lines  not  only  to  do  its  business  for 
half  of  what  its  competitors  had  to  pay,  but  to  pay  over  into  its  treasury  the 
excess  which  it  extorted  from  them. 

"For  the  service  which  cost  the  Standard  $1  its  competitors  had  to  pay  $2; 
and  tlii'  extra  dollar  extorted  from  them  was  paid  over  to  it  by  these  meek  and 
subservient  railway  officials.  This  is  not  rumor:  it  is  a  matter  of  public  record; 
it  is  action  which  has  been  denounced  by  upright  judges  in  Ohio  courts.  It 
was  upon  this  foundation  that  this  structure  was  reared.  Methods  have  been 
subsequently  modified,  but  the  hold  upon  the  railroads  has  never  been  relaxed, 
and  they  are  used  today  all  over  this  country  to  extort  tribute  from  the  indus- 
tries of  I  lie  people  for  the  aggrandizement  of  Standard  Oil. 

''This  use  of  the  railways,  by  overpowering  aggregations  of  capital,  as 
instruments  of  oppression,  is  the  tap  root  of  social  injustice.  It  is  the  one 
stupendous  and  threatening  social  evil.  The  railway  officials  have  become  mere 
puppets  in  the  hands  of  these  trust  magnates,  who  use  them  to  squeeze  the  life 
out  of  all   independent  enterprise. 

"This  is  the  business  in  which  Standard  Oil  has  been  engaged  from  the 
beginning  until  now.  It  represents,  as  no  other  aggregation  in  the  land  rep- 
resents, the  method  of  using  public  utilities  for  private  aggrandizement.  The 
railways,  which  are  chartered  to  render  to  all  the  people  an  equal  public 
service,  and  which  could  not  have  been  granted  the  power  they  possess  on  any 
other  terms,  have  been  employed  by  this  system  from  the  beginning  to  despoil 
and    to  oppri 

"At  present  this  system  owns  a  large  majority  of  the  principal  railways  of 
the  rountry  and  \\>  methods  of  oppression  are  illustrated  by  what  has  been 
going  on  jn    Kan 

"Againsl  all  this  there  is  now,  all  over  the  land,  an  insurrection  of  public 
sentiment.       The   blindness    of    the    people    to    what    has   been    going   on    has    beiii 

amazing,  hut  the}  are  beginning  to  be  aroused,  and  a  great  battle  is  imminent. 
"Our  presidenl  has  clearly  discerned  the  nature  of  this  issue;  he  is  right  in 
his  judgment  thai  it  is  l>\  far  tin  most  important  question  before  the  country, 
that  the  injustice  perpetuated  b\  the  railways  under  the  domination  of  com- 
binations   of    e;i|iit;i|    is    flagrant    and    deadly    and    thai    it    must    be   exposed    and 

punished.  1 1 «  is  bringing  'ill  the  power  of  the  government  thai  he  can  com- 
mand to  bear  in  t  his  dired  ion. 

"Standard  Oil  and  its  doings  are  now  al  the  bar  of  the  United  States 
courts.  Is  it  a  good  time  for  the  Congregational  churches  to  accept  momy 
from  the  man  who  represents  this  system? 


Lso  STANDARD   OIL. 

"Some  of  those  who  favor  the  acceptance  of  this  gift  argue  thai  we  cannot 
go  behind  the  action  or  inaction  of  the  courts  to  see  whether  money  has  been 
unjusth  acquired.  11  the  verdict  of  the  courts  is  to  govern  our  judgment  in 
such  cases,  illicit  it  not  be  well  to  wait  and  see  whether  the  courts  justify 
Standard  Oil  methods?  Ii'  we  approve  of  the  action  of  the  president  in  trying 
to  bring  to  justice  those  who  are  accused  of  great  public  wrongs,  would  it  not 
be  well  to  decline  to  receive  presents  from  the  men  who  are  on  trial?  Thai 
certainly  does  indicate  a  degree  of  sympathy  with  them  which  a  great  mis- 
sionary  society   mighi   wisely  withhold. 

"Bui  all  this  talk  about  legal  unanimity  as  an  adequate  screen  for  evil-doers 
i^  hardly   worthy  ^A'  religious  teachers. 

"  'The  prince  of  Monti'  Carlo,'  says  one  of  my  correspondents,  'has  never 
been  convicted  of  crime,  and  is  said  to  be  a  cultivated,  benevolent  gentleman. 
Would  they  accept  $1  ()(),()()()  from  him  for  foreign  missions?  Or  from  the 
Louisiana  lottery  in  the  days  of  its  prime,  when  it  fleeced  its  victims  under 
sanction  of  the  state?' 

"But  even  this  comes  short  of  the  true  statement  of  the  case.  The  wrong 
of  which  Standard  Oil  is  the  representative  is  far  more  deadly  than  anything 
of  which  gamblers  or  brothel  keepers  can  be  accused. 

"Jt  i>  an  organized,  persistent,  and  tremendously  successful  attempt  to  over- 
throw the  industrial  liberty  of  the  American  people.  Those  who  do  not  know- 
that  this  issue  is  squarely  before  us  must  be  pitied  for  their  blindness.  Those 
who  cannot  see  thai  it  is  the  most  serious  issue  that  this  nation  has  ever  faced 
have  not  thought  deeply  on  the  matter. 

"The  question  is  now  on  trial.  The  courts  of  the  United  States  are  dealing 
with  it,  but  above  and  behind  these  is  the  great  tribunal  of  the  American 
people.  It  is  their  verdici  thai  will  be  decisive  and  final.  What  will  this  court 
of  last  resort  have  to  say  about  the  methods  by  which  John  I).  Rockefeller, 
within  a  quarter  of  a  century,  has  built  up  a  fortune  of  perhaps  a  thousand 
million  dollars?  I  think  thai  he  cans  a  good  deal  more  for  the  decision  of  this 
court  than  for  the  decisions  of  the  lower  tribunals. 

"The  case  is  now  before  this  highest  court.  The  people  are  the  judges  and 
jurors.  We.  the  Congregational  people,  are  the  judges  and  jurors.  The 
nd  members  of  this  missionary  society  are  the  judges  and  jurors.  We 
ver  been  called  to  act  upon  a  more  momentous  case.  The  simple  ques- 
tion before  us  is  whether  we  think  it  right  during  the  trial  to  accept  a  present 
from  the  p<  rson  under  indictment. 

"This  is  the  issue,  stripped  of  all  its  sophistrie.8.     It  is  idle  to  compare  the 


STANDARD    OIL.  121 

case  with  other  cases  of  ordinary  immorality.     It  means  a  great  deal  more.     It 
touches  the  life  of  this  nation  far  more  vitally." 

Dr.  Newell  Dwight  Ilillis  of  Plymouth  Church,  Brooklyn,  one  of  the 
greatest  divines  of  the  age,  referred  to  John  D.  Rockefeller  and  John  D. 
Rockefeller,  Jr.,  in  reference  to  the  taint  upon  their  wealth,  as  follows: 

"The  saddest  words  that  have  been  written  in  this  generation  on  the  Rocke- 
feller gift  were  spoken  before  Brown  University  by  a  young  man  who  is  to 
inherit  one  of  the  greatest  fortunes  in  this  country.  They  were  spoken  in 
defense  of  the  trusts.      Listen  to  them: 

"  'The  American  beauty  rose  can  be  produced  in  all  its  splendor  only  by 
sacrificing  the  early  buds  that  grow  up  around  it.  The  rose  has  one  thousand 
buds,  and  in  order  to  produce  the  American  beauty  the  gardener  goes  around 
with  a  knife  and  snips  999  in  order  that  all  the  strength  and  beauty  may  be 
forced  into  one  bloom.'  In  his  economic  argument,  this  young  man  tells  the 
working  classes  brutally  that  909  small  business  men  must  be  snuffed  out  of 
existence  in  order  that  his  American  beauty,  the  trust,  may  be  produced. 

"Listen  to  Christ:    'Let  the  strong  bear  the  burdens  of  the  weak.'     And 

in:     'Give   and    it    shall    be   given    unto   you.' 

"These  words  in  defense  of  the  trust  are  the  most  heart-breakine  things  in 
literature  to  those  who  know  what  is  going  to  come  in  the  future.  Can  you 
wonder   that    after   that,    when    a   man    gives   gifts,     we     have     no     gratitude     to 

return  P" 

Wealth   of  the  Rockefellers. 

Probably  it  i-  true,  as  John  1).  Rockefeller  i^  credited  with  having  .said,  thai 
the  wealth  of  the  Standard  Oil  chief  cannot  he  calculated  at  a  given  time 
within  a  feu  millions  of  its  evict  amount.  A.S  has  been  shown  in  the  case  of  the 
chief  organ   of   the    Rockefeller  financial    party,   the    National   City    Bank,  direct 

influence   i-,   brought    to   bear   upon   $11,000,000,000   of  corporate   and   other 

wealth.  Inasmuch  OS  no  financial  interest  ever  thinks  of  opposing  "Standard 
Oil"  and  remain  in  the  business  game,  much  of  this  influence  i^  absolute, 
though  public  opinion  of  late  ha^  been  roused  to  fighl  al  the  very  name  of 
Rockefeller  or  Standard  Oil. 

The  Standard  Oil  company    itself,  of  which  John   I).   Rockefeller  i<  presi 
dent,  in  the  firs!  twentj  three  years  of  its  existence  paid  out  in  dividends  on  its 
$100,000,000  of  capital  stock,  $496,065,000,  or  considerably   more  than  one 
fifth  the  supply  of  nioiiev    iii  the  United  States     gold,  Bilver  ami  paper.     Of 
course   these  dividend   payments  do  not    represent   .ill   the    earnings  of  the  oil 


JOHN   DAVISON    ROCKEFELLER. 

This  is  .1  late  portrait  of  Mr.   Rockefeller  and  it   is  said   thai    it   was  the  first  sitting  he  had 
given   a   photographer    m    forty    years. 


STANDARD   OIL.  123 

trust.  Inasmuch  as  the  Standard  Oil  company  refuses  to  give  out  regular 
statements  of  its  earnings,  even  to  its  few  smaller  stockholders  outside  the 
Rockefeller  party,  no  one  knows  what  surplus  and  undivided  profits  have  accumu- 
lated, or  what  has  been  spent  in  crushing  competition,  lobbying,  influencing 
legislation  and  strengthening  its  grip  on  the  oil  monopoly  of  the  country. 

That  the  profits  have  grown  since  the  trust  first  secured  its  vital  grip  on 
the  industry  is  shown  in  the  following  table  of  annual  dividends  paid: 

1882 $  3,940,000          1895 $  17,000,000 

1««'3 4,500,000          1896 31,000,000 

1884 4,500,000           1897 33,000,000 

1885 7,875,000          1898 30,000.000 

1886 7,500,000           1899 33.000,000 

1887 9,000,000          1900 48,000,000 

1888 10,350,000          1901 48,000,000 

1889 10,800,000           1902 45,000,000 

1 890 1 0,800,000           190S 44.000,000 

1891 10,800,000           1 904 36,000,000 

1892 12,000,000  1905  (first  quarter).  .  .      1  .",,000.000 

1898 12,000,000                                                

1894 12,000,000               Total $496,065,000 

On  the  oilier  hand,  much  has  been  said  about  tin's  company  which  has  not 
bcin  founded  wholly  on  tacts.  For  instance,  the  statemenl  that  the  Oil  Trust 
has  never  issued  a  statemenl  of  it-,  finance  and  operations  is  wrong.     On  several 

OCCasion8    the   authorities   at    Washington    have   asked    for   figures    and    they    have 

been  given.  One  of  these  recent  statements  showed  the  company  to  have  only 
$150,000,000  tangible  assets,  though  it  is  supposed  now  that  these  assets  arc 
nearer  $250,000,000.     This   presumably   shows  a    reason    why   all    the  capital 

stock   of  the  conip.uix    was   not    disposed   of.      At    present    there  are  50,000  shares 

of  Standard  Oil  stock  in  the  treasury  of  the  company.  At  current  market 
figures  this  stock  is  worth  about  $30,000,000.  The  impression  has  been  that 
all  but  a  few  shares  of  the  $100,000,000  original  slock  ha. I  been  issued.  Pre- 
sumably the  company  ha-  been  so  prosperous  it  has  not  needed  to  use  this  stock 
to  raise  money. 

( tin'  reason,  according  to  well  informed  financiers,  is  because  il  has  been  the 
Rockefeller  policy  to  pay  out  most  of  the  earnings  l<>  the  stockholders  and  not 
to  pile  up  or  hale  ,i  surplus.  Some  jrears  ago  an  attempt  was  made  to  show 
thai  the  Standard  Oil  company  had  a  fabulous  surplus,  but  this  attempt  failed. 

Furthermore,  the   report    thai    this  company    pays  enormous  salaries  i<>  its 


12  I 


STANDARD   OIL. 


officials  is  wrong.  President  John  1).  Rockefeller  himself  draws  a  salary  much 
below  thai  of  an  average  bank  president.  This  is  said  to  be  $20,000  yearly. 
-  [•.  c.  \)odi\.  for  years  the  chief  legal  official  of  the  company,  has  been 
reported   to  be  receiving  $250,000  a  year,  hut   this  now   is  said  to  be  far  in 


•    Geo    i:    Lawrenci 
THE    UNIVERSITY    OF    CHICAGO.      Pounded    by    John    D.    Rockefeller. 
(North   section,    looking-  east.) 
rly  5,000    -  d    this   University. 

of  the  actual  figures.     In  fact,  economy  reigns  in  Standard  Oil  as  else- 

wh< 

irally  it  i>  to  !>••  supposed  that  most  of  the  Standard  Oil  dividends  went 

Into  the  hand-  of  the  Rockefeller  family.     Indeed,  when  it  is  seen  to  what  pur- 

cumulation  has  been  placed  it  is  proof  that  such  was  the  case.    Such 


ST  AX  DA  HI)    OTL. 


125 


a  vast  amount  of  money  piling  up  hour  by  hour  and  minute  bv  minute  had  to 
find  some  place  for  investment,  for  the  Rockefeller  party  always  is  looking  for 
increased  profits  of  the  wealth  it  controls. 

With  some  few  mistakes,  but  generally  with  a  marvelous  understanding  of 


1  .•   i    i :    La \vi  ■  ni  ■ 
THE    UNIVERSITY    OF    CHICAGO.      Pounded    by    John    D.    Rockefeller. 
(South  section,  looking  east.     "Midway"  of  World's  Fair  fame  shown  at  rig-lit.) 

..,  i  , 

the  increasing  wealth  of  tin  country,  the  guiding  genius  of  tlii>  great  money 
famil)  directed  tin  accumulating  wealth  into  banks  where  great  amounts  of 
lli«'  people's  savings  were  deposited  thus  giving  greater  financial  power;  into 
boards  of  insurance  companies,  where  more  savings  of  the  people  found  todge- 
1 1 m  nt  ;ind  where  >till  more  power  was  secured;  into  the  railways  and  steamship 


l-.'li 


ST  l  \ P. I  HI)    OIL. 


lines  upon  which  the  public  had  to  depend  for  transportation  and  to  which  it 
constantly  paid  tribute  in  freight  and  passenger  tolls;  into  gold  mines,  coal 
mines,  gas,  electric  and  telephone  and  telegraph  companies:  in  short,  wherever 
wealth  would  bring  wealth. 

John  1).  Rockefeller  recently  resigned  from  the  hoard  of  the  United  States 
i  corporation  because  of  a  desire  to  lav  off  some  of  the  cares  of  business 
in  his  advancing  years.  This  left  him  as  an  officer  and  director  of  only  one 
corporation  in  the  country — his  pel  Standard  Oil  company.  He  even  has 
repudiated  publicly  his  connection  with  the  Amalgamated  Copper  company, 
scandals  against  which  brought  the  name  "Standard  Oil"  into  great  disrepute. 
Hut  through  such  representatives  as  his  brother  William  Rockefeller,  his  son 
John  I).  Rockefeller,  and  the  other  lieutenants  of  his  money  army  such  as 
William  G.  Rockefeller,  -fames  Stillman  and  Henry  II.  Rogers,  he  and  the 
so-called  "Standard  Oil  crowd"  constitute  the  largest  stockholders  in  railroad 
and  industrial  companies  in  the  United  States,  if  not  in  the  whole  world. 
Probably  this  much  could  he  said  of  John  D.  Rockefeller  as  a  single  investor, 
apart    from  the  association  of  his  lieutenants  and  co-operators. 

The  "Standard  Oil"  influence  is  now  openly  recognized  in  the  management 
of  railways  having  a  mileage  of  over  131,000  miles — nearly  65  per  cent  of  the 
total  railway  mileage  of  the  United  States.  Some  of  the  many  companies  in 
which   this  party   i^  almost  all-powerful  are  the  following: 


National  City  Bank. 

Rank  of  tin-  Met  ropolis. 

Bowery   Savings  Rank. 

Central   Realty  Bond  and  Trust  Co. 

Columbia   Rank. 

Farmers'   Loan  and  Trust   Co. 

Fidelity    Rank. 

fifth    Avenue   Safe   Deposit    Co. 

Fidelity  Trusl  ( !o. 

Hanover    National    Hank. 

Guaranty   Trusl    Co. 
Industrial   Trust   Co. 
Lawyers'  Title  Insurance  Co. 
Lincoln    National    Rank. 

can    Surety    Co. 
Lincoln   Safe   Deposit   Co. 

!  Butchers'  &  Drovers'  Hank. 
.National    Citizens'    Hank. 
National   Hank  of  Fairhaven. 


Newport  Trust  Co. 

Neu    York  Trust  Co. 

Riggs'    National    Rank,  Washington. 

Second    National    Rank. 

United  States  Trust  Co. 

Standard  Oil  Co. 

United   States   Steel   Corporation. 

Colorado  Fuel  and   Iron   Co. 

Tennessee  Coal  and    Iron  Co. 

American   Linseed  Oil  Co. 

Federal   .Mining  and   Smelting  Co. 

Consolidated  Gas. 

Brooklyn  Union  (las. 

Fast    River    Gas    Co.,    Long    Island 

Mutual  Alliance  Trust  Co. 

Mutual  Life  Insurance  Co. 

New    York  Carbide  Acetylene  Co. 

National   Transit   Co. 

New  York  Mutual  Gas  Light  Co. 


STANDARD   OIL. 


127 


National  Fuel  Gas  Co. 

New  Jersey  and  Staten  Island  Ferry 
Co. 

Rapid  Transit   Ferry  Co. 

Richmond  Borough  Co. 

Richmond   Light   and   Railroad   Co. 

Staten  Island  Ferry  Co. 

Tennessee  Copper  Co. 

Allis-Chalmers    Company. 

Audit  Company  of  New  York. 

George  A.  Fuller  Company. 

New    York  Life  Insurance  Co. 

Queens   Insurance   Co. 

Terminal  Warehouse  Co. 

Western  Union  Realty  Co. 

Union   Pacific  Railroad. 

Central    Pacific. 

Southern   Pacific. 

Galveston,  Harrisburg  and  San  An- 
tonio. 

Houston  and  Texas  Central. 

Illinois   Central. 

Kansas  City   Southern. 

Morgan,  Louisiana  and  Texas  R.  R. 
\    S.    S. 

Oregon  and  ( 'alifornia. 

Oregon  Short   Line. 

Oregon    Railway    and    Navigation. 

Texas  and  New   ( Orleans. 


Pacific  Coast  Railway. 
Baltimore  and  Ohio. 
Chicago  and  Alton. 
Atchison,  Topeka  and  Santa  Fe. 
Erie. 

Northern   Pacific. 
Chicago,  Burlington  and  Quincy. 
Delaware  and   Hudson. 
Denver  and  Rio  Grande. 
Rio  Grande   Western. 
Northern   Securities  Company. 
Pacific  Mail  Steamship  Co. 
Chicago,  Milwaukee'  and   St.   Paul. 
New  York  Central. 
Lake  Shore  and   Michigan   Southern. 
Delaware,  Lackawanna  and   Western. 
Missouri    Pacific. 
Central   New    England  Railway. 
Harlem  River  and   Port   Chester. 
Hartford   and    Connecticut    Western. 
New  York  and   Harlem. 
New    York,    New    Haven    and    Hart- 
ford. 
Poughkeepsie  Bridge  Co. 
Atlantic    Coast     Electric    Railroad. 
Missouri,  Kansas  and  Texas. 
Chicago  and    Northwestern. 
Louisiana    Western    Railroad. 
Morris  and  Essex. 


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CHAPTER   VIII 

THE  TRUST  IN  OIL— THE  STANDARD  OIL  COMPANY. 

How  Advantageous  Transportation  Hates  Called  Discrimination  Helped  Build 
a  Gigantic  Monopoly  and  (rash  Out  Competition — The  Famous  South 
Improvement  Company — The  Ohio  Supreme  Court  Ousted  the  Standard 
Oil  Trust  from  that  State— The  Oil  Fields  of  the  World. 

If  there  is  any  trust  in  the  strictest  sense  of  the  word — a  corporation  or 
combination  which  monopolizes  the  business  of  its  field — it  is  the  Standard  Oil 
Company,  organized  and  dominated  by  John  D.  Rockefeller  and  his  lieutenants. 
In  fact  the  title  of  "trust"'  now  given  with  much  ill  feeling  generally  to  all  cor- 
porations thai  arc  simply  "big,"  whether  they  are  what  the  term  signifies  or 
not.  came  from  this  organization — the  father  of  monopolies  as  we  know  them 
in  this  industrial  age.  For  the  Rockefeller  oil  concern,  with  its  control  of 
about  85  per  cent  of  the  more  than  119,000,()()0  barrel  output  of  oil  in  the 
United  States  and  of  90  per  cent  of  the  export  trade,  was  known  as  the  Stand 
ard  Oil  Trust  for  many  years  up  to  the  time  it  was  forced  to  change  its  form 
to  the  Standard  Oil   Company   under  the  laws  of  New    Jersey   in   1  N<)<). 

The  history  of  the  Standard  Oil  Company  practically  is  the  history  of 
monopoly  and  the  fighl  of  monopoly  restraint  in  America.  In  the  year  1865 
John  I).  Rockefeller  began  his  career  in  a  small  way  by  refining  petroleum  at 
Cleveland,  Ohio.  At  thai  time  the  oil  industry  was  in  its  infancy:  indeed, 
before  the  discovery  of  the  Drake  oil  well  at  Titusville,  Pa.,  in  1859,  it  was 
necessary  l<>  distill  coal  into  petroleum  before  refining  petroleum  into  the  useful 
product,  kerosene.     Hardly  a  year  had   passed   from  the  time  of  Drake's  sue 

.  however,  than  many   new    wells  were  sunk  around  Oil  City  and   the  AJle 
gheny   River.      Immediately  after  this  the  production  of  petroleum  grew   tre- 
mendously; "oil    fever"  struck  the  speculators  as  the  "gold   fever"  had   in   IN  I!). 
Tin   demand  for  oil  in  1865  had  become  so  enormous  thai  the  refineries  of  thai 
period  could  by  no  means  handle  the  heavy  business. 

Rockt  feller  was  our  of  the  lirsi  to  see  the  opportunity  ahead  of  the  refining 

business  and  was  also  one  of  the  firsl  to  see  the  necessity  of  handling  the  busi- 

-.n  .1  large  scale  so  as  to  save  expenses  in  refining.     Therefore,  in  1867,  he 

united  into  the  firm  of  Rockefeller,  Andrews  \   Flagler  his  own  firm  and  those 

129 


ISO  THE  TRUST  IN  OIL. 

of  his  brother  and  several  friends.  The  cause  of  this  combination  as  stated  by 
.1.  1).  Rockefeller  himself  "was  the  desire  to  unite  our  skill  and  capital,  in  order 
to  carry  on  a  business  of  some  magnitude  and  importance  in  place  of  the  small 
business  that  each  had  separately  heretofore  carried  on."  The  business  of  this 
enlarged  firm  grew  rapidly  and  the  Standard  Oil  Company  of  Ohio  succeeded 
it.  with  a  capital  stock  of  Si ,()()().()()().  At  this  time  Standard  Oil,  while  being 
larger  than  most  of  its  competitors,  produced  only  4«  per  cent  of  all  oil  refined. 
Hut  at  that  time  the  oil  interests  of  the  country  stretched  only  from  Louisville, 
Kentucky,  to  Portland,  Maine,  and  consisted  of  some  250  refineries.  From  this 
point  on  to  1ST7  the  growth  and  progress  of  the  Standard  Oil  was  so  great 
that  its  4  per  cent  of  the  country's  output  increased  85  per  cent.  During  these 
years  its  chief  advantage  in  growth  was  tin1  ability  to  get  advantageous  trans- 
portation rates — called  discrimination. 

In  1ST1  the  famous  South  Improvement  Company  had  been  organized  by 
Standard  Oil  interests  for  making  contracts  with  such  railways  as  the  Pennsyl- 
vania. Erie  and  New  York  Central  by  which  the  Standard  should  ship  45  per 
cent  of  its  oil  over  the  Pennsylvania  and  divide  the  remainder  equally  between 
the  other  roads  and  receive  in  turn  from  the  roads  rebates  on  all  petroleum  and 
it>  products  carried  by  them,  regardless  of  who  the  shipper  might  be.  Fur- 
thermore, the  roads  were  hound  by  agreement  not  to  charge  less  than  full  rates 
to  all  other  parties  who  shipped  oil  by  them.  The  roads  even  entered  into  a 
contract  with  this  South  Improvement  Company  to  foster  the  interests  of  the 
Standard  Oil  and  to  prevent  it  against  loss  or  injury  by  competition.  At  once 
great  fight  arose  against  such  methods.  Oil  producers  refused  to  sell  to  the 
Rockefeller  refineries.  But  the  Standard  grew  fat  on  its  rebate  power  and 
steadily  increased  this  by  absorbing  other  refineries,  enlarging  its  capital  stock 
and  checking  competition  as  rapidly  as  possible.  In  1872,  the  form  of  combina- 
tion among  several  refineries  was  known  as  an  "alliance."  In  1882  the  Stand- 
ard Oil  Trust  was  formed.  This  was  not  a  combination  of  corporations,  but 
of  stockholders,  who  were  able  to  control  business  although  outwardly  the 
il  companies  continued  to  do  business  as  before.  In  the  meantime  pipe 
lines  were  laid  to  facilitate  the  carrying  of  oil.  This  became  as  great  an  influ- 
ence for  monopolizing  the  oil  trade  of  the  country  as  the  secret  railway  rebates 
in  the  company's  early  history.  In  the  fights  that  developed  to  seize  more 
control  on  tin  part  of  the  Standard  Oil  and  to  save  the  remnants  of  a  collaps- 
ing business  by  the  independents,  rival  pipe  line  companies  were  organized.  At 
one  time  the  Pennsylvania  Railroad  carried  oil  at  eight  cents  a  barrel  less  than 
cost.      In   the  end   the   Standard   Oil   won. 


THE   TRUST  IX  OIL.  131 

In  the  meantime  the  people  had  been  rising  to  crush  out  this  monopoly 
which  had  checked  all  competition  in  the  domestic  oil  situation.  For  ten  years 
the  Trust  existed  and  the  capital  controlled  increased  to  $121,000,000.  But  in 
1891  the  attorney  general  of  the  State  of  Ohio  began  proceedings  to  oust  the 
Trust  as  a  corporation  because  it  had  abused  its  corporate  franchises  under 
which  it  had  operated.  In  1892,  the  Ohio  court  handed  down  an  important 
ruling  that  it  was  illegal  for  members  of  several  corporations  to  combine  as 
members  and  merge  their  interests  in  a  trust.  This,  it  declared,  was  in  restraint 
of  trade,  opposed  to  public  policy  and  therefore  illegal.  This  put  an  end  to 
the  old  form  of  consolidation  and  caused  the  formation  of  the  Standard  Oil 
Company  of  today,  which  holds  twenty  companies  which  were  the  offspring  of 
the  dissolved  Trust.  At  the  time  of  the  new  incorporation  in  1899  under  the 
laws  of  New  Jersey,  which  permitted  the  practical  consolidation  of  all  com- 
panies into  one,  the  following  were  the  reported  component  parts  of  the  new 
kind    of   -trust": 

Appraised  value.    Capitalization. 

Anglo-American  Oil  Co.,  Ltd $     6,91  -'UiW     $     5,000,000 

Atlantic  Refining  Co K,0:il,376  5,000,000 

Buckeye  Pipe  Line  Co 7.941,038         10,000,000 

Eureka   Pipe  Line  Co 1,547,055  5,000,000 

Forest   Oil  Co 8,528,813  5,500,000 

Indiana    Pipe    Line    Co 2,014,953  1,000,000 

National    Transit    Co 2.->.790\712  25,455,200 

New    York    Transit    Co 4,999,300  r,,000.000 

Northern   Pipe  Line  Co 707,007  1,000,000 

Northwestern   Ohio   Nat.   Gas  Co 1,396,760  3,278,500 

( ftiio   Oil    Co 8,260,878  2,000,000 

Solar   Refining  Co 711,798  500,000 

Southern   Pipe  Line  Co 8,279,918  5,000,000 

Southern  Penn  Oil  Co 8,021,654  2,500,000 

Standard  Oil  Company  of  Indiana 1,088,518  1,000,000 

Standard  oil  Company  of  Kentucky...  3,604,800  1,000,000 

-   indard  Oil  Company  of  Ne*  Jersey.  1  b,983,94S  lo.ooo.ooo 

Standard  oil  Company  of  New  York..  10,77'.', ISO  7,000,000 

Standard  oil  Company  of  Ohio 8,426,014  8,500,000 

Union  Tank  Line  Company 8,057,187  8,500,000 

T,,tal    $121,631,804     $102,238,700 

since  the  incorporation  of  the  Standard  oil  Company  in  L899,  control  of 
many  other  properties  has  been  gained.  Some  of  these  are  the  Last  Ohio  Gas 
Company,  the  Shawmul  oil  Company,  the  Cumberland  Pipe  Line,  the  Pacific 


THE  TRUST  IN  OIL.  133 

Coast  Oil  Company,  the  People's  Natural  Gas  Company  of  Pittsburg  an<l 
others.  It  is  believed  also  to  control  the  G.  M.  Guffy  oil  interest.  Standard 
Oil's  interests  radiate  throughout  the  entire  counry  and  now  cover  all  those  of 
importance  in  the  great  oil  fields  of  Texas  and  California  as  well  as  its  origi- 
nal  fields   in   Ohio,   Kentucky,  Pennsylvania,   West    Virginia,   etc. 

The  principal  concern  that  dares  to  lift  its  head  against  Standard  Oil  is 
the  Pure  Oil  Company,  a  corporation  of  $1  (),()()(),()()()  capital  stock  which  works 
in  harmony  with  an  independent  seaboard  pipe  line,  the  United  States  Pipe 
Line  Company.  Even  in  this  pipe  line  the  Standard  Oil  Company  has  a  mi- 
nority interest.  Elsewhere  there  are  about  sixty  independent  refineries  of  small 
importance  who  also  are  fighting  the  Trust  in  the  oil  business. 

The  authorized  capital  stock  of  the  Standard  Oil  Company  is  $100,000,000 
of  common  stock  and  $10,000,000  5  per  cent  non-cumulative  preferred  stock. 
Of  the  former  $97,500,000  has  been  issued.  It  has  never  been  stated  whether 
the  preferred  stock  has  been  issued  or  not.  Following  arc  the  mighty  names 
which  appear  on  the  official  roster  of  the  company:  John  1).  Rockefeller, 
president;  \Y.  II.  Tilford,  treasurer;  Charles  M.  Pratt,  secretary,  and  William 
Rockefeller,  John  1).  Archbold,  Henry  M.  Flagler,  Henry  II.  Rogers,  Oliver 
II.  Payne,  C.  W.  Harkness,  F.  Q.  Barstow,  J.  A.  Moffatt,  Walter  Jennings 
and  E.  T.  Bedford,  directors. 

The   Oil   Fields   of   tin-    World. 

Of  lite  years  the  public  has  become  so  familiar  with  the  Standard  Oil  com- 
pany as  a  financial  influence  on  the  entire  course  of  trade,  that  there  has  been 
a  tendency  to  forget  the  real  operations  which  gave  the  company  its  strength 
and  riches  in  the  beginning.  For  it  is  true  that  the  Standard  Oil  compan\  i- 
tlie   greu.te.st    producer   of    petroleum    and    the   by   products   of   mineral    oil    in    all 

the  world.  The  industrial  side  of  the  oil  business  is  hardlj  less  picturesque 
than  the  financial  operations  of  the  great  company. 

The  greatest  oil  fields  m  the  world,  at  leasl  as  far  as  developed  properties 
.ire  concerned,  are  divided  just  about  equally  between  the  Eastern  and 
tin  Western  hemispheres.  Most  important  of  these  from  the  American  view 
point,  .mmI.  indeed,  from  the  development  of  the  oil  trade  in  general,  is  the 
one  which  extends  from  western  Pennsylvania,  across  Ohio,  and  into  [ndiana. 
This  is  tin-  sci  ne  of  the  oil  excitement  of  fifty  years  ago,  when  bonanza  for 
tunes  were  made  in  a  day  and  the  whole  land  seemed  saturated  with  petroleum 
and  the  wealth  that  flowed  from  it.  W^yy  were  produced  such  characters  as 
"Coal   Oil   Johnnie"  and   his  kind,  who  became  millionaires  in  a   moment    and 


154  THE  TRUST  l\  OIL. 

pated  their  fortunes  almost  as  rapidly.  Here  in  these  central  states 
was  born  the  Standard  Oil  company,  ami  from  here  its  operations  ramified 
until   they   extended  over  the  entire  world. 

The  other  field  of  like  magnitude  and  importance,  in  sonic  respects  sur- 
passing even  the  American  oil-bearing  districts,  is  that  which  centers  at  Baku, 
i  Russian  porl  on  the  west  shore  of  the  Caspian  Sea,  just  south  of  the  Cau- 
casus Mountains.  The  Caucasus  is  a  great  range  which  extends  from  the 
Black  Sea  to  the  Caspian  Sea,  forming  the  boundary  between  Europe  and 
Asia.  The  country  to  the  south  of  the  range  was  formerly  included  in  the 
ancient  Asiatic  kingdom  of  Georgia,  but  for  the  last  century  it  has  been  a 
part  o\'  the  Russian  empire  and  is  called  the  Province  of  the  Caucasus.  The 
capital  is  Tiflis,  ahout  half  way  between  the  Black  Sea  and  the  Caspian.  A 
railwav  connects  Batum  on  the  Black  Sea  with  Baku  on  the  Caspian,  passing 
through  Tiflis. 

In  the  apportionment  of  the  petroleum  industry  of  the  world,  the  Stand- 
ard Oil  company  has  been  allotted  the  Western  hemisphere  and  the  east  coast 
of  Asia,  while  the  great  corporation  controlled  by  the  Rothschilds  confines  its 
operations  to  Europe,  Africa,  the  Indian  Ocean  and  Western  Asia.  Of  course 
then-  are  minor  companies  with  local  trade  in  many  countries,  but  the  greatest 
volume  of  traffic  in  petroleum  or  naphtha  and  its  products  is  in  these  hands. 

TIm  contrast  between  the  Titanic  mountain  scenery  of  the  Caucasus  and 
the  industrial  activities  of  Baku  is  a  striking  one.  For  many  miles  along  the 
shore  of  the  Caspian  Sea  the  earth  and  the  air  arc  saturated  with  petroleum. 
Hundreds  of  great  oil  wells  pour  their  liquid  wealth  into  gigantic  reservoirs, 
to  await  shipment  by  rail  or  vessel  to  the  European  and  Asiatic  markets  where 
the  product  is  consumed.  Sometimes  a  great  well  bursts  from  all  restraint 
and  Dours  forth  a  flood  of  petroleum  which  runs  to  waste  until  the  stream  can 
hi  diverted  into  a  temporary  earthen  reservoir.  When  fires  occur  here,  there 
i»  little  to  do  but  let  them  exhaust  themselves.  Sometimes  the  losses  reach 
millions  of  dollar-  before  a  limit  can  be  placed  upon  the  ravages  of  the  flames. 
The  Baku  oil  fields  seem  to  be  inexhaustible,  and  already  they  have  brought 
iinnx ■!!-'■  wealth  to  all  those  heavily  interested  in  them.  The  annual  product 
of  petroleum  here  is  nearly  fifty  million  barrels. 

The  naphtha  product  of  the  fields  surrounding  the  Caspian  Sea  has  been 
utilized  for  fuel  in  much  larger  degree  than  has  been  true  in  the  United 
States.  Almost  every  railway  engine  and  steamship  operating  in  the  Russian 
Empire  dep  nds  entirely  upon  petroleum  for  fuel.  Inasmuch  as  many  of 
th<  n    railway   Lines,  and  some  of  the  greatest  rivers,  on  which  large  fleets  of 


THE   TRUST  IN  OIL.  135 

steamships  ply,  connect  directly  with  the  Caspian  Sea,  the  fuel  is  available 
with  the  least  expense  for  shipment  to  the  place  of  consumption.  The  Rus- 
sian railway  which  penetrates  eastward  into  Asia  from  the  shore  of  the  Cas- 
pian almost  to  the  confines  of  India  and  China,  likewise  depends  upon  Baku 
petroleum  for  fuel.  Another  field  is  now  under  process  of  development, 
directly  across  the  Caspian  from  Baku,  and  the  indications  are  that  here  on 
the  edge  of  the  desert  an  enterprise  will  grow  hardly  second  to  its  neighbor. 

The  marked  difference  between  the  wells  of  the  Baku  fields  and  those  of 
Pennsylvania  and  Ohio  is  that  in  the  former  a  few  wells  produce  enormous 
quantities  of  naphtha  by  a  natural  flow,  while  in  the  latter  many  wells  are 
drilled,  and  it  is  necessary  in  most  instances  to  employ  pumps  to  bring  the  oil 
to  the  surface  in  a  comparatively  small  stream.  The  Asiatic  wells  spout  like 
huge  fountains,  as  high  in  the  air  as  the  boiling  geysers  of  the  Yellowstone 
Park,  yielding  thousands  of  barrels  daily  from  a  single  bore.  Their  American 
rivals  require  many  wells  to  produce  the  same  quantities. 

There  is,  however,  an  American  field  where  petroleum  has  been  discovered 
in  recent  years,  in  which  the  characteristics  are  more  like  those  in  the  region 
of  the  Caspian.  These  later  discoveries  centered  at  Beaumont,  Texas,  where 
gushi  rs  producing  from  .'JO, 000  to  70,000  barrels  of  petroleum  a  day  wire 
opened  a  few  years  ago.  In  the  height  of  the  excitement  over  these  discoveries 
bonanza  fortunes  grew  as  rapidly  as  had  been  the  case  in  earlier  times,  when 
oil  was  first  discovered  in  Pennsylvania.  Of  late  the  field  has  been  less  con- 
spicuous, partly  because  it  had  been  over  boomed  and  over-developed,  and 
partly  because  neither  transportation  nor  consumption  has  reached  the 
capacity    necessary   to    justify   the   tremendous  yield. 

California,  too,  has  been  contributing  largely  to  the  oil  supply,  and  latest 
of  .ill  in  America,  Indian  Territory,  Oklahoma  and  Kansas  have  been  added 
to  the  list.  Iii  other  countries,  important  discoveries  have  been  made  in  Aus- 
tralia, China   and   in  certain  of*  the   Kast    Indies,  but    these  [atter  fields  have   not 

been  developed  sufficiently  to  make  them  factors  in  the  markets  of  the  world. 


7.  *j 


:  o  « 


CHAPTER    IX 

THE  WAR  ON  STANDARD  OIL. 

Kansas  Legislation  Appropriated  Money  for  a  State  Refinery  to  Refine  the  Oil 
Produced  in  that  State — The  Pipe  Line  Made  a  Common  Carrier  in   Kan 
808—"The   Entire  Business   is   Dependent   upon   the  Pipe   Line  Systems- 
Signs  now  Point  to  Federal  Control  of  the  Pipe  Lines-  -Pursuing  a  Policy 
with    the  Motto  "Business  is    War. " 

It  was  early  in  1905,  after  President  Roosevelt  had  uttered  his  celebrated 
"square  deal"  doctrine,  thai  the  Standard  Oil  Company  suffered  the  worst 
attack  against  the  abuse  of  its  monopoly  that  it  ever  had  experienced.  The 
strictures  against  the  domineering  methods  of  other  monopolies,  the  exposures 
of  "graft"  in  high  places,  hank  defalcations,  rows  in  life  insurance  companies 
and  other  high  financial  circles — all  these  scandals  had  raised  a  storm  of  pro 
test  for  the  common  people,  a  storm  that  swept  across  the  whole  country, 
dashing  in  fury  at  the  walls  of  nearly  every  trust  and  even  assailing  many 
good  men  and  institutions  simply  because  they  were  big  and  powerful. 

This  anti-trust    wave    found   the  oil  business    in   a    peculiar   position.      In   the 
firsi    place,   there  was  danger  thai    the  Standard   Oil   Company   would   lose   its 
iron  grip  of  monopoly  on  the  oil  business  of  the  world.      A   few  years  before 
this  there  had  been  discoveries  of  greai   oil   regions  in  Texas  and  California. 
People  in  these  neighborhoods  went  oil  mad.  speculating  and  booming  properly. 
The  immediate  result  of  the  rush  to  these  districts  was  overproduction  of  oil 
that  i>.  mure  oil  was  produced  than  there  was  immediate  markel  for  at  the  pre 
vailing    high    prices.     Abroad    a    similar    condition    prevailed.     Whereas    the 
Standard   oil    had   had   a   monopoly   of   most    of  the  districts   of   Europe  and 
could  dictate  prices  from  da)   to  day  without    fear  of  competition,  there  arose 
a  movement  whereby  at  least  a  dozen  of  the  largesi  banking  houses  of  Europe 
interested  themselves  in  the  oil  fields  of  Russia  and  elsewhere  and  began  cut 
tin<^  prices  righi  and  left   in  order  to  drive  out   Standard  oil. 

Thus  the  Standard  found  itself  up  against  a  formidable  rival  and  in  order 
to   hold    its   BUprcmaCl    had    to   meet    in    tin    righi    with    weapons   of   fin    same   kind 

LSI 


198  THE    WAR   ON  STANDARD  OIL. 

low  prices.  Foreign  interests  even  began  to  invade-  the  oil  fields  of  the 
United  States.  And  at  this  point  the  serious  phase  of  the  situation  developed 
in  the  fact  that  the  Standard  Oil  Company  did  not  control  the  oil  production 
of  the  United  States  through  actual  ownership,  bul  through  the  purchase  of  oil 

from  the  will  owners  or  producers  who  leased  their  output,  to  the  Standard  at 
the  prices  the  Standard  was  willing  to  pay.  When  the  Standard  began  to  cut 
prices  there  was  a  wail  from  every  well  owner.  But  the  overproduction  of  oil 
both  in  Europe  and  the  Far  East  continued.  This  checked  the  amount  of 
export  business  of  the  Standard  and,  of  course,  at  once  worked  against  domes- 
tic conditions,  where  the  oil  that  had  been  produced  for  export  could  not  find 
a  home  market.  Prices  fell  rapidly;  in  a  very  short  time  it  had  amounted  to 
sixty  cent>  a  barrel.  Of  course  the  Standard  Oil  officials  were  alarmed  about 
the  prospect  of  losing  profits  and  they  had  to  curtail.  They  explained  that 
the  price  for  oil  must  be  regulated  by  supply  and  demand.  They  even  stated 
that  unless  oil  production  was  lessened  prices  would  go  still  lower,  for  only  a 
certain  amount  of  oil  could  be  used  at  certain  prices.  Everybody  seemed  to  be 
pushing  the  work  of  production  of  oil  at  the  wrong  time.  Prices  in  Europe 
fell  the  same  as  those  in  the  United  States.  The  actual  estimated  production 
of  oil  in  the  United  States,  which  was  a  partial  cause  for  this  stress  in  the  oil 
market,  is  shown  in  the  following  government  statistics  for  190-4  and  1903: 

Barrels 

1904.  1903. 

California    29,700,000  24,382,472 

Texas    20,000,000  17,955,572 

( )hio    19,062,550  20,480,286 

\Y,  st     Virginia 12,754,005  12,899,395 

V  u   York  and  Pennsylvania 11,999,055  12,518,134 

Indiana      11,315,000  9,186,411 

Louisiana    6,800,000  917,771 

Kansas.  Indian  Territory  &  Oklahoma.      6,000,000  1,071,125 

K(  ntuckv   and    Tennessee 1,015,068  554,286 

( lolorado     500,000  483,925 

Wyoming,  etc 12,000  11,960 

Totals     119,157,678     100,461,337 

But  if  the  increase  in  domestic  oil  production  in  one  year  was  nearly 
19,000,000  barrels,  it  was  even  greater  over  a  long  period.  Indeed,  the 
increase  in  twenty-five  years  was  1)9,250,000  barrels.  Then,  as  has  been  said, 
the  foreign  production  wras  a  very  great   factor  in  the  competition,  the  prino 


THE    WAR   ON   STANDARD   OIL.  139 

pal  competitor  of  the  United  States  being  Russia.  Following  are  some  of  the 
statistics  on  foreign  production: 

Barrels. 
Russia,   normal    annual    production ...  .80,584,000 
Dutch    Indies,    normal    annual    produc- 
tion        7,275,000 

Galicia,  normal  annual  production...  5,235,000 
Roumania,  normal  annual  production.  3,975.000 
Burma,  normal  annual  production.  .  .  .    2,510,000 

Now,  all  this  may  or  may  not  have  been  considered  by  the  people  who  had 
been  crying  out  against  trust  aggression.  But  as  soon  as  prices  began  to 
decline,  they  charged  that  the  Standard  Oil  Company  was  depressing  the  mar- 
ket maliciously  in  order  to  gain  a  better  grip  on  its  monopoly.  The  center  of 
the  storm  was  in  Kansas  and  Indian  Territory,  where  the  oil  production  was 
more  than  the  Standard  Oil  said  it  could  market  and  where  25,000,000  bar- 
rels a  year  could  have  been  pumped  if  prices  tempted  such  excessive  produc- 
tion. This,  compared  with  the  80,500,000  barrels  a  year  of  all  Russia,  SUg- 
gests  thi    possibilities  of  the  glut  in  the  oil  market. 

The  storm  broke  when  the  producers  of  Kansas  took  their  troubles  of  pro- 
duction and  Ion  prices  before  the  state  legislature.  Charges  of  discrimination 
u.re  made.  The  independent  producers  of  the  state  banded  together  into  a 
$7,000,000  company  to  fight  the  Standard.  The  legislature  practically  kicked 
the  Standard  out  of  Kansas,  made  an  appropriation  for  a  state  refinery  to 
refine  the  oil  produced  in  Kansas  so  as  to  be  independent  of  the  trust,  and  per- 
suaded the  federal  government  to  make  a  searching  inquiry  into  the  manner  in 
which    the   Standard    Oil    conducted    its   monopolistic   business.       Hardly    had    this 

been  done  than  legislatures  throughoul  the  country,  almost  as  one  body,  began 
congratulating  Kansas  for  the  fight  it  had  made  for  fair  dealing.     State  after 

state  pas-,  d  resolution  condemning  the  practices  of  the  trust.  In  some  stales 
th.n  was  an  attempt  to  stop  the  building  of  pipe  lines-  the  medium  through 
which    the   trust    hv    reason    of   easy    transportation    gains    most    of    its    monopo|\ 

p«>wer.  The  action  of  the  Kansas  Independenl  incensed  the  Standard  oil  Com- 
pany, which  ordered  all  operations  in  that  stale  suspended. 

This    in    turn    embittered    Hie    Kansas    oil    men.       .\s    Congressman    Campbell 

of    Kansas    said,   "this    w&a   arbitrarj    business.     When   oil    was   discovered    in 
Kansas  its  development   was  undertaken   by   the   farmers  who  owned   the  land. 
They  sank  their  own  well-  and  whenever  one  was  'shot'  an  agent  of  the  Stand 
ud   eras  on   hand   i<>  pal   the  farmer  on   the  back   and   tell   him   to  go  ahead. 


i  to  I  HI     WAR   OX   STANDARD  OIL. 

They  furnished  the  money  in  advance,  look  the  oil  out  al  a  dollar  a  barrel,  and 
shipped  it  to  Kansas  City,  thus  encouraging  production  and  stimulating  the 
digging  tit'  wells  throughout  the  whole  Held.  Then  came  the  Standard  Oil 
Company's  pipe  line.  The  owners  equipped  their  wells,  made  the  necessary 
connections  at  their  own  expense  and  prepared  to  ship  their  oil,  with  the  vis- 
ions of  fortunes  at  the  promised  rate  of  $1  a  barrel.  Tank  cars  disappeared, 
the  pipe  line  became  indispensable,  and  then  the  price  dropped  and  kept  on 
dropping  until  it  reached  47  cents  a  barrel.  This  may  have  been  an  old  game 
through  Pennsylvania,  hut  it  was  a  new  one  for  Kansas.  The  people  had  been 
encouraged  to  spend  their  money  sinking  wells  and  the  developing  the  territory. 
When  the  development  had  reached  its  limit  the  Standard  Oil  Company  put 
down  the  price,  and  as  there  was  no  other  pipe  line  and  no  other  refinery,  there 
was  no  market  for  the  product.  The  Standard  Oil  Company  resorted  to  tactics 
that  were  disreputable  and  illegal.  Because  farmers  and  people  dependent 
upon  them  asserted  their  ordinary  rights  and  asked  relief  of  the  Legislature  they 
were  boycotted  and  blacklisted  by  the  Standard  Oil  Company.  Mr.  Rocke- 
feller's nun  issued  an  edict  forbidding  their  agents  purchasing  any  oil  in 
Kansas.  This  resulted  in  throwing  out  of  employment  not  less  than  1  (),()()() 
men.  Lessees  of  fully  4,500  wells  will  be  ruined  financially  unless  something  is 
done  to  curh  the  monopoly.  Flowing  wells  are  going  to  waste,  oil  is  running 
over  the  country  and  pumping  wells,  of  course,  have  abandoned  operations. 
Towns  which  largely  increased  in  population  as  a  result  of  the  discovery  of  oil, 
h\  a  mere  (diet  of  the  Standard  Oil  Company,  have  been  reduced  to  a  condition 
of  commercial  prostration  and  the  people  are  being  thrown  upon  the  streets 
without  employment  or  capital.  The  Standard  Oil  Company  is  a  pretty  big 
concern,  hut  the  people  of  Kansas  and  the  country  at  large  purpose  to  find 
out  whether  this  company  can  resort  to  illegal  methods  to  crush  out  its  com- 
petitors and  control  the  price  of  its  raw  material  without  being  punished  in  the 

■al  courts." 

So  serious  were  the  charges  against  the  Standard  Oil  before  the  Congress 
of  the  United  States  thai  in  directing  the  President  and  the  Secretary  of  Com- 
merce and  Labor  to  investigate  the  business  of  the  trust  the  following  resolu- 
tion- were  passed  by  the  House  of  Representatives: 

"R<  solved,  That  the  Secretary  of  Commerce  and  Labor  is  requested  to  inves- 

te  the  cause  or  causes  of  the  low  price  of  crude  oil,  or  petroleum,  in  the  * 
United  Stat.-,  and  especially  in  the  Kansas  field,  and   the  unusually  low  mar- 

s  between  the  price  of  crude  oil  or  petroleum  and  the  selling  price  of  refined 
oil  and  its  by-products,  and  whither  said  conditions  have  resulted  in  whole  or 


THE    WAR   ON   STANDARD   OIL.  141 

in  part  from  any  contract,  combination  in  the  form  of  a  trust,  or  otherwise,  or 
conspiracy  in  restraint  of  trade  or  commerce  among  the  several  states  and  ter- 
ritories, or  with  foreign  countries. 

"It  also  is  proposed  to  investigate  whether  prices  have  been  controlled  in 
whole  or  in  part  by  any  corporation,  joint  stock  company,  or  corporate  com- 
bination engaged  in  commerce  among  the  several  states  and  territories,  or  with 
foreign  nations:  also  whether  such  corporation,  joint  stock  company,  or  cor- 
porate- combination  in  purchasing  crude  oil  or  petroleum  by  any  order  or  prac- 
tice of  discrimination  boycotts,  blacklists,  or  in  any  manner  discriminates 
against  any  particular  oil  field;  also  to  investigate  the  organization,  capital, 
profits,  conduct,  and  management  of  the  business  of  such  corporations,  com- 
pany, or  corporate  combinations,  if  any,  and  make  an  early  report  of  its  find- 
ings, according  to  law,  to  the  end  that  such  information  may  be  used  by  Con- 
ss  as  basis  of  legislation,  or  by  the  department  of  justice  as  a  basis  for  legal 
proceedings." 

Perhaps  one  of  the  severest  blows  to  the  oil  trust  was  the  action  of  the  Kan- 
legislature  making  the  pipe  line  a  common  carrier — that  is,  enabling  any 
one  to  use  a  pipe  line  as  publicly  as  a  railway  for  shipping  oil  across  the  coun- 
try. The  value  of  the  pipe  line  to  the  oil  trust  is  indicated  in  the  statement 
made  by  the  oil  king  himself,  John  I).  Rockefeller,  before  an  industrial  com- 
mission. "The  entire  business  is  dependent  upon  the  pipe  line  system,"'  said 
he.  "Without  it  every  well  would  shut  down  and  every  foreign  market  would 
be  closed  to  us." 

It  appears  thai  the  oil  magnates  soon  discovered,  upon  embarking  in  their 
chosen  field  of  monopoly,  that  ordinary  methods  of  transportation  would  not 
serve  the  oil  trust.  In  the  firs!  place  the  business  grew  -rapidly  as  people 
came  to  know  the  use  and  value  of  petroleum.  It  cos!  too  much  l<>  pack  the 
,,j|  and  ship  it  across  the  country,  hence  the  trust  devoted  its  energies  to  the 
pipe  line  construction.  Here  is  Hie  ray  the  oil  king  describes  the  conquest  ot 
tli«    country's  oil   business: 

"To  operate  the  pipe  lines  required  franchises  from  the  stales  m  which 
they  were  located,  and  consequently  corporal  ions  in  those  states,  just  as  the 
railroads  running  through  different  slates  are  forced  to  operate  under  separate 

state   charters. 

••To  perfeci  a  pipe  line  Bystem  of  transportation  required  in  the  neighbor- 
hood of  $50,000,000  capital.     This  could  not  be  obtained  or  maintained  with 

out  .hi  in. In-trial  combination.     The  pipe  line  system   required  other  improve 
i t>,  such  as  tank  cars  upon   railways,  and,  finally,  tank   steamer..     Capital 


14£  ////:    WAR   ON   STANDARD   OIL. 

had   bo  be   furnished    for   them  and  corporations  created   to  own  and  operate 

them." 

It  seemingly  had  never  occurred  to  the  federal  government  thai  pipe  lines 
were  in  the  same  class  of  common  carriers  as  the  railroad,  and  carriers  engaged 
in  business  on  rivers  and  other  bodies  of  water.  Because  of  this  the  federal 
government  did  not  have  jurisdiction  over  the  acts  of  the  oil  trust  in  operat- 
ing it-  pipe  lines.  Signs  now  point  to  federal  control.  Indeed  Rockefeller 
himself  testified  that  this  would  be  the  natural  trend  when  he  pointed  out  the 
dangers  of  combination  which  he  himself  was  effecting  and  the  remedies  which 
might  be  evoked.      This  is  what  he  said: 

-The  dangers  are  that  the  powers  conferred  by  combination  may  be  abused 
—that  combinations  may  he  formed  for  speculation  in  stocks  rather  than  for 
conducting  business,  and  that  for  this  purpose  prices  may  be  temporarily  raised 
instead  of  lowered.  Combination  is  necessary,  and  its  abuses  can  be  minimized; 
otherwise  our  legislators  must  acknowledge  their  incapacity  to  deal  with  the 
most  important  instrument  of  industry.  Hitherto  most  legislative  attempts  have 
been  an  effort  not  to  control,  but  to  destroy.  Hence  their  futility.  First,  fed- 
eral legislation,  under  which  corporations  may  be  regulated,  and,  second,  in 
lini  thereof,  state  legislation  as  nearly  uniform  as  possible,  encouraging  com- 
binations of  persons  and  capital  for  the  purpose  of  carrying  on  industries,  but 
permitting  state  supervision,  not  of  the  character  to  hamper  industries,  but 
sufficient  to  prevent  frauds  upon  the  public." 

All  tin  turmoil  which  had  been  caused  by  conditions  of  over  production  in 
the  oil  business,  and  the  cry  for  the  "square  deal"  brought  replies  from  the 
Standard  Oil  Company.  From  the  time  the  Rockefellers  first  started  business 
their  policy  was  never  to  let  any  one  know  what  they  did.  Stockholders  never 
knew  what  the  company  really  earned.  The  public  never  knew  what  oil  cost. 
No  on<  knew  what  methods  would  be  employed  next  to  crush  out  competition. 
In  fact  publicity  was  a  word  unknown  to  Standard  Oil.  No.  26  Broadway, 
\  York,  was  synonymous  with  reticence.  It  was  known  only  too  well  by 
those  who  did  business  with  Rockefeller.  Flagler,  Rogers  or  any  of  that  stamp 
that  to  "leak"  any  information  was  commercial  suicide.  As  has  been  shown 
in  the  chapter  describing  the  gnat  financial  party  known  in  Wall  street  and 
else  a-  "Standard  Oil,"  there  was  never  any  actual  connection 
with  the  oil  concern  called  the  Standard  Oil  Company  and  the  many  banks, 
railways,  and  industrial  trusts  said  to  be  under  -Standard  Oil"  influence.  Still 
the  association  of  James  Stillman,  the  head  of  the  National  City  or  "Rockefel- 
ler'*  bank,  and    II.    II.    Roger-,    the   right   hand    man   of  the   Rockefellers    in   all 


THE    WAR   OX  STANDARD  OIL.  143 

sorts  of  financial  undertakings,  unfailingly  brought  the  inference  that  the 
power  of  the  Rockefellers  was  back  of  such  projects.  It  goes  without  saying 
that  William  Rockefeller,  who  for  weeks  at  a  time  absolutely  controlled  the 
machinery  of  speculation  on  the  New  York  Stock  Exchange,  could  not  escape 
from  classing,  by  this  very  action,  great  speculative  deals  in  which  he  and  H.  H. 
Rogers,  and  James  Stillman  were  concerned  as  "Standard  Oil"  operations. 
Such  deals  smacked  too  much  of  the  Rockefeller  or  "Standard  Oil"  family 
methods  to  escape  public  attention  and  public  branding.  Yet  when  the  spec- 
ulators and  magazine  writers,  among  them  Thomas  W.  Lawson  of  Boston, 
began  laving  serious  charges  of  misuse  of  public  savings  and  abuse  of  public 
trust  at  the  door  of  "Standard  Oil,"  meaning  thereby  the  financial  clique  of 
money  kings,  corporation  magnates  and  speculative  manipulators  who  had 
gathered  around  the  Rockefellers,  the  generation  of  reticence  of  the  Standard 
Oil  Company  was  broken.  No.  2(j  Broadway,  New  York,  which,  ever  since  it 
had  housed  the  oil  king,  the  financial  king,  the  speculative  king  and  his  lieu- 
tenants, retainers  and  subjects  had  impudently  affronted  the  public  by  pur- 
suing a  policy  in  every  branch  of  industry  with  the  motto  that  "Business  is 
war,"  spoke  at   last. 

And  the  statement  that  had  been  wrung  out  of  the  man  who  had  been 
impervious  to  all  former  attacks  was  as  equivocating  as  indeed  some  of  the 
charges  had  been  and  was  meant  apparently  to  throw  dust  in  the  public's 
i  jres.  For  the  statement,  issued  by  S.  C.  T.  Dodd,  chief  counsel  for  the  Stand- 
ard Oil  Company,  was  a  quibble,  attempting  by  making  fine  distinctions 
between  the  two  sorts  of  "Standard  Oil"  which  we  have  described  here,  to  lead 
the  public  to  infer  that  many  of  the  charges  laid  truthfully  to  the  door  of 
the  financial  system  called  "Standard  Oil"  had  no  foundation  in  fact.  Here  is 
tin   lir-t  answer  of  the  Standard  Oil  Company  to  the  cry  for  the  "square  deal:" 

"In  view  of  the  many  false  and  misleading  statements  from  various  sources, 

the  directors  of  the  Standard  Oil  Company  deem  it  advisable  to  slate  to  the 
company's  shareholders  and  the  public  that  neither  now  nor  at  any  time  has 
the   Standard   Oil   Company   or  any   of   its   constituent    companies   been    interested 

in  any  business  not  directly  related  with  ami  necessary  to  the  petroleum  trade. 

••It   would  be  almost   impossible  to  designate  in   this    denial    the    different 

classes  of  business  with  which  irresponsible  parties  have  coupled  the  Standard 

Oil    Company's    name,   hut    it    may    not    lie   amiss    to   Bpecify    copper,   steel,   banks, 

railroads  and  ^as  (other  than  natural  gas)  as  being  most  prominently  men- 
tioned.     With  none  of  these  affairs  has  the  Standard  Oil  Company  been  at   any 

time  connected. 


l  ii  THE    WAR   OX   STANDARD  OIL. 

"Individual  members  <>f  the  Standard  Oil  Company  have  been  and  are  inter- 
ested as  individuals  in  various  enterprises,  hut  lliis  is  entirely  outside  of  the 
business  of  the  Standard  Oil  Company,  which  is  oil  alone,  unaffected  by  other 
interests  in  which  its  stockholders  may  invest. 

"Neither  is  it  true  tint  the  Standard  Oil  Company,  -John  D.  Rockefeller 
or  any  officer  of  the  Standard  Oil  Company  has  taken  part  in  securing  the 
nomination  of  an\  of  the  candidates  for  office,  as  is  so  positively  stated.  Fur- 
thermore,  it    is  entirely   untrue   that  there   is  any  'Standard   Oil   Party'   banded 

ther  for  speculation  in  stocks,  ;is  is  commonly  charged.  The  name  of  the 
Standard  Oil  Company  is  frequently  used  by  designing  persons  in  the  manipu- 
lation of  the  stock  market,  but  its  use  is  unwarranted. 

"The  Standard  Oil  Company  departs  from  its  usual  custom  in  making  this 
denial  for  the  reason  that  the  statements  being  made  at  this  time  by  newspa- 
pers, magazines  and  sensational  public  speakers  appear  to  be  unusually  menda- 
cious and   may.  to  a  great  extent,  mislead  the  public." 

This  action  but  drew  greater  attention  to  the  oil  trust  and  the  men  who 
ran  it  and  were  a  great  factor  in  running  the  whole  financial,  industrial  and 
speculative  machinery  of  the  company.  T.  W.  Lawson  of  Boston,  who  con- 
ducted a  crusade  against  the  Rockefeller  party  both  in  the  press  and   in  the 

k  market^  of  the  country,  answered  the  reply  of  Dodd  and  set  up  more 
and  greater  charges.  We  have  already  referred  to  the  hesitancy  of  the  Board 
of  Mi  —  ions  of  the  Congregational  Church  to  accept  money  from  John  D. 
.feller  for  missionary  purposes  because  of  charges  made  that  the  money 
was  tainted.  This  action  brought  out  a  typical  statement  by  Lawson,  which  we 
n  produce  a-,  follows : 

"It  i>  a  crying  shame  that  the  old  gentleman,  John  1).  Rockefeller,  is  so 
pestered  and  hectored  at  the  vintage  time  of  his  wonderful  career.  The  head 
of  the  greatest  hand  of  ruthless  heart  pluckers  and  soul  drillers  the  world  has 
seen,  the  old  gentleman  has  risen  to  an  eminence  never  before  attained 
by  man,  an  eminence  where  all,  rich  and  poor,  master  and  slave,  saint  and  sin- 
can  focus  his  being  between  themselves  and  God's  bright  sun  and  size  him 
up  from  his  breast  hone  to  his  shoulder  blade,  from  armpit  to  armpit.  The  old 
•man  kicks  against  the  sizing  up,  but  he  should  hear  with  it,  remembering 

t    pat  .1   fortitude  always  have  been  the  heritage  of  the  tribe  of  Shy- 

.  and  that  he  who  dances  must  in  time  pay  the  fiddler. 

"Tin  tribe  of  'Standard  Oil'  has  had  a  long  and  merrily  mad  dance. 
I!     eath  their  feel  as  they  whirled  have  been  thrown  countless  scores  of  human 

rts,  brilliant  brains,  enthusiastic  souls,  all  gathered  by  the  tribe,  and  many 


THE    WAR   OX   STANDARD   OIL.  145 

and  many  a  weary  fiddler  has  faltered,  dropped  and  died,  or  been  dragged 

.shrieking  to  the  madhouse  because  he  could  no  longer  respond  to  the  old  gen- 
tleman's inexorable  'on  with  the  dance.' 

"I  would  give  one  word  of  advice  to  the  wise  old  spokesman  of  the  old 
gentleman  Rockefeller,  that  wise  lawyer  who  for  forty  years  has  shown  his 
great  master  how  to  play  hide  and  seek  with  the  lords  of  his  country,  who  for 
forty  years  has  shown  the  tribe  of  'Standard  Oil'  how  to  keep  on  the  sunny 
Bide  of  prison  bars — my  advice  is  don't  talk;  it's  a  bad  habit.  When  'Standard 
Oil"  talks  the  American  people  listen,  and  they  may  get  irritated  as  they  listen." 

The  Lawson  diatribes,  investigations  by  Congress  and  state  legislatures  and 
calumniation  in  the  press  did  not  disturb  John  D.  Rockefeller  half  as  much  as 
the  charges  made  by  Dr.  Gladden.  Mr.  Rockefeller  and  his  son  John  1). 
Rockefeller  were  great  workers  in  the  Baptist  church  and  this  assault  upon  his 
honor  wrung  the  old  man's  heart  and  even  caused  him  to  close  his  home  at 
Lakewood.  The  Rockefeller  endowment  of  the  University  of  Chicago  started 
by  reason  of  the  fact  that  this  great  seat  of  learning  originally  was  a  Baptist 
institution.  Furthermore  the  Rockefeller  private  life  had  been  what  everyone 
considered  highly  moral.  A  well-known  periodical — Leslie's  Weekly — in  speak- 
ing of  his   family  relations  recently  said: 

"Many  who  greel  .John  1).  Rockefeller  for  the  first  time  bring  with  them 
much  prejudice  engendered  by  the  diatribes  with  which  every  one  is  familiar, 
and  are  surprised  to  find  in  him  a  man  of  finest  courtesy,  dignified,  but  gra- 
ciously cordial  to  all.  They  leave,  charmed  at  their  reception,  contrasting  the 
demeanor  of  the  dominant  figure  in  the  world'-  finance  with  the  imposing 
grandeur  of  the  little  bin-  man  of  their  own  home  town.  No  man,  however 
unimpressionable  he  may  he,  can  stand  in  the  presence  of  Mr.  Rockefeller 
without  feeling  the  repressed  power  of  the  man.  lie  possesses  in  a  marked 
degree  thai  force  of  personal  prestige  that  is  the  dominanl  attribute  of 
every  man  of  distinction  in  any  sphere.  In  their  efforts  to  fathom  the 
mystery  of  his  power  over  men,  his  mosl  vociferous  traducers  have  been 
forced  to  granl  his  this  quajity.  It  is  through  this  secrel  of  mastery  of 
all    men    or    things   thai    he   has   kepi    the   crowd   at    a     distance,    and    has 

defeated     its     purpose     to     possess,    ;I|     all     hazards,     that     which     he     will     never 

surrender     which  the  humblesl   citizen  of  this  land  claims  the  right   to  guard 

from    public    BCTUtiny       his    pergonal    privacy.       John    I).    Rockefeller    has   a    kind 

and  generous  heart,  and  i>  susceptible  lo  such  influences  as  govern  the  emotions 
of  other  men,  hut  the  sledge  hammer  method  of  winning  his  affection  has  never 
proved  successful.      The  true  story  of  Mr.    Rockefeller  may   never  see  the  light. 


l  Hi  THE    WAR  ON  STANDARD  OIL. 

Much  of  it  is  written  in  the  hearts  of  those  who  come  within  the  radius  of 
his  extensive  private  charities." 

None  of  the  big  captains  of  industry  ever  took  into  their  code  of  business 
ethics  any   rule  of  conduct   which   was  based  on   "a   fair  show   for  the  under 

fellow."*  Aii  analysis  of  the  character  of  the  "oil  king"  probably  would  dis- 
close the  tact  thai  working  on  the  principle  that  ''business  is  war"  he  had 
really  never  understood  that  in  this  twentieth  century  the  code  of  ethics  is 
changing  to  "a  square  deal  for  every  man,  rich  and  poor  alike."  At  any 
rate,  two  replies  to  the  charges  of  Dr.  Gladden  were  made  in  a  manner  that 
>howed  how  deeply  Rockefeller  felt  the  taint  upon  his  "home"  character  as 
distinguished  from  his  "office"  character.  One  of  these  replies  was  by  Henry 
11.  Rogers,  vice-president  of  the  Standard  Oil  Company,  business  associate  of 
Rockefeller  and  organizer  of  many  of  the  companies  for  which  Rockefeller 
tried  to  escape  responsibility,  and  great  power  in  the  stock  market  and  Wall 

street. 

".Ministers  say  queer  things,"  said  Mr.  Rogers.  "Dr.  Washington  Gladden 
s.i\s  that  everybody  knows  that  John  D.  Rockefeller  has  obtained  his  money 
dishonestly.  With  as  much  reason  I  could  say  that  everybody  knows  that 
Dr.  Gladden  would  not  trust  the  ten  commandments  for  ten  days  with  the 
deacons  of  his  church,  because  they  would  surely  break  some  of  them  and  bend 
the   rest. 

"Slavery  in  certain  sections  of  the  United  States  was  legal  until  President 
Lincoln's  (mancipation  proclamation.  Rebates  on  railroads  were  just  as  legal 
until  the  passage  of  the  interstate  commerce  commission  act. 

"After  an  exhaustive  examination  by  the  industrial  commission,  authorized 
by  Congress  June  18,  1898,  in  a  review  of  evidence,  the  commission  reported 
as   follow  s  : 

'  'It  has  been  charged  as  a  matter  of  general  belief  on  the  part  of  almost 
all  the  opponents  of  the  Standard  Oil  Company  that  these  discriminations  in 
various  forms  have  been  continually  received,  even  up  to  date.  On  the  other 
hand,  these  charges  have  been  denied  in  toto  and  most,  emphatically  by  every 
representative  of  tin  Standard  Oil  Company  with  reference  to  all  cases  except- 
ing oik,  which  they  claim  was  a  mistake,  the  amount  of  freight  due  being 
promptly  paid  on  discovery  of  the  error.  The  Standard  Oil  Company  not 
merely  challenged  the  opponents  to  bring  forth  proof  of  any  case  but  pro- 
duced many  letters  from  leading  officials  of  railroads  to  show  that  the  company 
had  in  no  case  received  any   favors  or  asked   for  them.'  " 

By    this   time   Mr.    Rockefeller's   feelings   were   so  deeply   wounded    that    S. 


THE    WAR   OX  STANDARD   OIL.  147 

C.  T.  Dodd  was  called  in  again  to  make  reply  for  him,  for  Rockefeller  per- 
sonally would  not  do  so.  This  statement  was  voluminous  but  because  it  shows 
the  frame  of  mind  and  attitude  of  the  world's  greatest  monopolist  and  money 
magnate  we  append  it  at  length : 

"There  may  well  be  a  difference  of  opinion  on  the  abstract  question  whether 
the  Board  of  Missions  should  receive  gifts  unless  satisfied  that  the  giver  is 
honest;  but  all  will  agree  that  if  he  who  brings  his  gift  to  the  altar  must  come 
with  clean  hands,  still  more  should  he  who  ministers  at  the  altar  and  receives 
the  gift  be  free  from  stain.  There  is  no  excuse  for  those  who  make  money 
dishonestly  and  still  less  excuse  for  those  who  in  the  name  of  religion  falsely 
accuse  their  fellow  men. 

"The  objection  to  Mr.  Rockefeller's  gift  is  based  upon  the  allegation  that 
he  made  his  money  dishonestly.  This  accusation,  if  false,  is  vile,  and  being 
made  by  ministers  in  the  pretended  interest  of  molality  is  doubly  vile.  The 
assertion  should  not  be  made  unless  it  can  be  readily  established  by  specification 
and  proof.  I  have  seen  no  proof  and  no  attempt  even  at  specification,  exeepl 
in  the  protest  of  Dr.  Gladden.  He  says,  'In  this  ease  the  investigation  has 
been  thoroughly  made  and  the  facts  are  known.  The  legislative  inquiries,  the 
records  of  the  courts  have  given  the  reading  people  of  this  country  the  mate- 
rials for  a  judgment  upon  the  methods  of  Standard  Oil,  and  there  never  was  a 
day  when  their  minds  were  as  clear  on  this  subject  as  they  are  now.'  Then 
follows  the  specification:  'Mr.  Rockefeller  may  deny  that  rebates  are  now 
given  to  the  Standard,  but  the  Standard  now  controls  about  two-thirds  of  the 
railroads  of  this  country,  and  its  power  is  exerted  in  establishing  classification 
of  freights  in  such  a  way  that  it  can  kill  competition.  Rebates  are  no  longer 
neo  ssarj .' 

"The  assertion    is   not    true.       No  such   slate  of   facts  has  ever   been   disclosed 

by  any   investigation,  nor  supported   by   evidence   in   any   court   of   law.     No 

such  facts  exist  to  be  proved.  The  Standard  Oil  Companj  does  not  own  a 
share    of    stock    of    any     railroad    company,    nor    does    it     control    any    railroad 

company.     Stockholders   of   the   Standard    undoubtedly    invest    in    railroad   as 

in  other  shares,  but  stockholders  of  the  Standard  are  not  a  majority  on  the 
board  of  directors  of  any  railroad  company,  so  far  as  I  am  aware,  and  there- 
fore  cannot    control. 

"The    question    of    railway    rebates    and    Standard    control    of    railways    was 

investigated   by   the   United   States   Industrial   Commission    in    L900,  and   they 

reported  no  such  facts.  Members  of  the  Standard  .and  of  the  railways  were 
examined    in    relation    to   these   subjects.       It    was   shown    thai    prior   to   the   enact- 


l  is  /  HE    WAR   ON   STANDARD  OIL. 

nniit  of  the  Interstate  Commerce  law  the  rebate  system  whs  universal.  Rail- 
roads made  their  nominal  rates  higher  than  they  expected  to  obtain  from  reg- 
ular shippers,  and  the  amount  of  actual  freighi  to  be  paid  was  a  matter  of 
contract.      Each   shipper   made   the   best    terms   he   could.     The   Standard   did 

not  invent  this  system;  it  found  it  existing,  and  could  not  do  business,  without 
submitting  to  it.  Like  all  other  shippers,  it  made  the  host  terms  it  was  able 
to  make  with  the  railroads.  Its  refineries  were  located  at  points  where  it 
could  take  advantage  of  railway  competition.  It  also  strove  to  give  equiva- 
lents for  reductions  in  freight.  It  shipped  not  only  carloads,  but  trainloads. 
It  provided  terminal  and  other  facilities,  and  assumed  all  risks  of  loss.  Public 
opinion,  more  enlightened  in  these  days  than  in  those,  may  have  discovered 
that  this  was  all  wrong;  hut  at  that  time  the  business  man  who  did  not  accept 
that   method   would  better  have  closed  his  shop. 

"The  -tories  told  of  the  immense  aggregate  of  the  rebates  paid  to  the 
Standard  were  shown  by  that  investigation  to  be  untrue.  A  large  portion  of 
the  rebates  paid  were  not  discriminatory.  They  were  paid  to  all  shippers  who 
shipped  exclusively  by  rail.  It  was  impossible  for  any  shipper  to  know  with 
certainty  what  rates  his  competitors  wire  paying.  The  Standard  often  found 
that  its  competitors  had  been  paying  less  rates  than  it  paid.  Furthermore, 
the  public'  obtained  the  advantages  of  the  low  rates  received.  A  reduced  price 
fur  refined  oil  kept  pace  with  reduction  in  rates,  whether  this  reduction  was 
by  way  of  rebates  or  otherwise.  And  the  price  at  which  the  public  for  many 
veais  has  been  obtaining  oil  would  simply  have  been  impossible  had  not  ship- 
pers forced  the  railways  to  reduce  their  rates,  which  they  did  first  by  rebates 
and  later  by  open  schedule. 

"The  system  of  rebates  has  happily  received  the  condemnation  of  law. 
The  Standard  welcomed  the  change  as  a  beneficial  one.  But  to  say  now  that 
it  should  not  have  obtained  the  best  rates  under  the  old  system  which  its 
position  enabled  it  to  obtain  is  an  impossible  counsel  of  perfection.  The  evi- 
dence   before  the   Industrial  Co ission  shows  very  clearly  to  any  unprejudiced 

mind  that  since  the  enactment  of  the  Interstate  Commerce  law  the  Standard 
has  obeyed  it  in  every  particular.  The  evidence  of  the  Standard  managers 
and  freight  agents  was  corroborated  by  the  certificates  of  managers  and  freight 

nts  <if  all  the  leading  railways  of  the  United  States,  to  the  effect  that  by  no 
rebates,    arrangements,   devices   or    plans   of   any    character    had   the    Standard 

[ved  less  rates  than  other  shippers. 

"It  is  true  that  alligations  to  the  contrary  were  made  before  the  Com- 
mission, but  these  were  founded  upon  surmise,  and  were  not  sustained  by  proof. 


THE    WAR    OX   STAXDARD   OIL. 


149 


Neither  did  the  Commission  find  them  to  be  true.  Any  candid  man  who  will 
read  the  evidence  must  be  satisfied  of  the  truth  of  the  facts  sworn  to  by  the 
Standard  Oil  Company,  corroborated  as  they  are  by  the  officers  and  agents  of 
the  railroads  themselves." 


NEW   STYLE   OP   GRAIN   ELEVATOR. 

id  of  usl  or  stone  In  tl i  cylinders 

ron   or   steel  are   now   employed  ton     nave  b  I    holding 

from  half  a  million  '"    i   million  bueh<  la  ol 


CHICAGO'S    FINANCIAL    CENTER. 

La   gaiie  street    Is  to  Chicago  whal    Wall   Btreel   is  to  New  York,  or  Throckmorton  street 

real    banking    institutions — the    homes   of    insurance    companies — 

.  .,    .,,    the   south    end   of   the   street,  the   Board  of  Trade.     Here  also    Is 

e    Millard  the    Wbman'8   Christian   Temperance  Union,    and    the   Young 

tion    Building. 


CHAPTER   X 

THE  BEEF  TRUST. 

./  Far-reaching  Trust,  as  it  Calls  on  Most  Families  Three  Times  a  Day — It 
Fixes  Its  Own  Prices  Both  in  the  Buying  of  Live  Stock  and  the  Selling 
of  Dressed  Meat — Special  Privilege  through  the  Private  Car  System — 
Members  of  the  Beef  Trust  Characterized  as  "the  Most  Arbitrary,  the 
Most  Remorseless,   that  Have  Ever  Been  Known." 

In  spacious  offices  141  the  Rookery  Building,  in  the  heart  of  the  great 
financial  district  of  Chicago  called  La  Salle  Street,  there  is  quartered  a  com- 
pany which  may  be  said  to  hold  the  shattered  hopes  of  a  group  of  the  most 
powerful  captains  of  industry  of  the  world.  This  is  the  headquarters  of  the 
National  Packing  Company,  capital  only  $15,000,000,  which  had  been 
destined  to  control  the  meat  trade  of  the  whole  world,  a  far-reaching  trust 
with  prospective  capital  stock  of  half  a  billion  dollars.  Rut  law  and  a  panic 
stepped  in  between  hopes  and  realities  and  the  actual  accomplishment  of  well- 
laid  plans  came  to  naught.  For,  while  this  company  is  controlled  in  harmony 
by  the  large  packing  industries  called  the  Beef  Trust,  it  actually  accomplishes 
the  business  principally  of  governing  several  smaller  companies  which  it 
absorbed    in    preparation    for    the    world-wide    trust    corporation    which    never 

•  •.line. 

Hut   if  the  government  and  financial  troubles  of  1903  prevented  the  incor- 
poration   of  all    the    leading   companies    which   deal    in    meat    as   a    distinct    stock 

company,    the    non-existence   of   such    a    corporation    embracing   the    packing 

companies    that    operate    in    the    Chicago    Union    Stock    Yards    and    at     Omaha, 

Kansas   City,   East    St.   Louis.   SI.    Paul,   SI.   Joseph   and   elsewhere  does   not 

prevent    the  actual  existence  of  a   meal    trust    in   the  true  and   monopolistic  sense 

of  the  *rord.  The  United  States  Supreme  Court  has  set  its  stamp  of  author- 
ity   on    the    statement    that    the    Meet'    Trust    exists.      The    lower    federal    courts 

have  taken  up  the  nrorV  of  the  "square  deal'1  in  the  effort  to  make  this  trust 
obey   the  law. 

Generally   speaking  the  trust   i.  made  up  <>f  wh.it  are  called  the  *'bi^  six" 
packing  firms  thai    make  Chicago  their  headquarters.     These  are   Armour  & 

151 


1  52 


THE   BEEF   TRUST. 


I      .  Suit't  &  Co.,  Nelson  Morris  &  Co.,  the  Schwarzschild  &  Sulzberger  Com 
pany,  the  Cudahy   Company  and  the  first  mentioned   National    Packing  Com- 
pany.    Not  all  these  companies,  but  most  of  them,  control  directly  or  through 
affiliated  interests  or  family  tics  the  packing  business  of  America. 

The  gross  business  of  the  six   companies   is  estimated  at  $700,000,000  a 
year.      They  control  seventy-five  auxiliary  companies,  thirty-three  plants  scat- 


RESIDENCE  OF  J.  OGDEN  ARMOUR,  PRESIDENT  OP  ARMOUR  &  CO. 

I  all  over  the  country,  and  extensive  private  car  lines  for  handling  their 
products  in  25,000  private  freighi  cars.  But  when  this  is  said  perhaps  the 
true  significance  of  the  character  of  the  Beef  Trust  is  not  revealed. 

In  the  firs!   place,  the  trust — that  is  those  interests  working  in  harmony — 
has  a  substantia]  monopoly  of  the  beef  trade  over  a  large  section  of  the  coun- 
try, particularly  in  the  Large  cities  where  there  is  little  or  no  chance  for  com- 
mon with  other  concerns.      It  slaughters  over  one-half  of  the  annual  product 


THE  BEEF   TRUST.  153 

of  rattle  in  the  United  States  and  even  dominates  the  prices  at  which  cattle, 
hogs,  sheep,  etc.,  shall  be  sold  in  the  principal  markets  of  the  world.  As  for 
being  far-reaching,  the  Beef  Trust  calls  three  times  a  day  on  most  families 
of  the  civilized  world  for  profits  on  its  business  investment.  It  goes  across 
the  ocean  and  collects  tribute  as  readily  as  it  knocks  at  the  door  of  the  home 
consumer  of  meat  in  Chicago.  It  fixes  at  its  own  will  the  price  of  every 
pound  of  fresh,  salted,  smoked  or  preserved  meat  prepared  and  sold  in  the 
United  States — and  this  often  regardless  of  actual  conditions  prevailing  in  the 
market  for  live  animals.  It  fixes  the  price  of  every  ham,  every  pound  of 
bacon,  every  pound  of  lard,  every  can  of  prepared  soup.  It  has  an  absolute 
monopoly  of  the  dressed  and  preserved  meat  export  business  of  the  country. 
Furthermore,  it  controls  the  American  trade  in  fertilizers,  hides,  bristles,  horn 
and  bone  products.  It  owns  or  controls  or  dominates  every  slaughter-house 
worth  considering.  In  one  way  or  another  it  commands  the  fruit,  butter,  egg 
and  poultry  markets  of  the  nation.  Steam  and  electric  railroads  are  owned 
or  controlled  by  it  and  the  interests  allied  with  it,  such  as  the  Armour  family, 
control  or  are  vitally  interested  in  such  great  street  car  and  electric  light  sys- 
tems as  those  of  Kansas  City,  such  great  railway  property  as  that  jointly 
controlled  with  other  interests  in  the  great  Chicago  Subway  system.  It  owns 
factories,  shops,  stockyards,  mills,  land  and  land  companies,  plants,  ware- 
houses-   and  some  say  even  legislators  and  congressmen. 

A  great  deal  of  loose  talking  has  been  done  about  the  Beef  Trust  and 
Ihe  impression  has  gone  abroad  that  the  control  of  the  food  supply  of  the 
nation  by  this  body  of  men  with  headquarters  in  Chicago  is  absolute  in  every 
respect.  This  i-  not  wholly  true,  for  no  monopoly  ever  has  been  so  absolute 
that  Borne  competition  did  not  enter  into  consideration.  In  view  of  the  import- 
ance of  the  field  tin  Beef  Trusl  occupies,  however,  and  in  view  of  the  fact 
that  the  government  has  investigated  the  trust's  operations,  there  is  good 
KM!  for  inquiring  into  the  fads  known  officially  as  to  what  this  trust  accom- 
plishes, how  it  works,  how  ii  is  controlled  and  to  what  actual  degree  the  public 
has  paid  tribute  to  the  men  of  this  great  industrial  combination.  To  do 
this  we  -hall  have  to  turn  to  ihe  report  of  Commissioner  Garfield  who  investi- 
gated the  trust   for  Ihe  people  through  government   channels. 

The  cause  of  this  investigation  was  principally  a   -real   hue  and  cry  thai 
,,,,-■    a    fen    pears  ago  over  the  price  of  meat   at   retail  enters,  especially   in 

the   .ast.rn    cities,    compared    with    what    animals    cost    at    that    lime    on    the    hoof. 

Charges   were  mad.    by   shippers  thai    ihe  packing  house  combination   worked 
together   in   conspiracy    to   hold   down    the    price   of   cattle    when    shipped    to 


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THE   BEEF   TRUST.  155 

market.  This,  of  course,  was  so  as  to  get  animals  as  cheaply  as  possible. 
At  the  same  time  it  was  charged  that  in  order  to  hold  these  prices  of  live 
animals  down  the  packers  would  retire  from  the  market  at  times,  thus  glut- 
ting the  supply  and  causing  panic  among  the  shippers.  This,  it  was  said, 
usually  brought  the  live  stock  men  to  terms — the  packers'  terms.  When  these 
and  other  charges  had  gone  to  such  an  extent  that  Judge  Grosscup  in  Chi- 
cago issued  an  injunction  against  the  members  of  the  packing  combination 
from  entering  into  a  conspiracy  to  restrain  trade,  and  when  the  State  of  Mis- 
souri had  fined  a  number  of  the  packers  for  violating  the  anti-trust  law  of 
that  state,  President  Roosevelt  had  an  investigation  started.  The  report  that 
was  made  covered  only  certain  parts  of  the  controversy,  those  dealing  with 
industrial  conditions.      But  these  are  of  great  interest. 

In  the  hist  place  this  report,  with  one  exception,  is  the  only  real  light 
thrown  on  the  methods  of  the  Beef  Trust.  That  exception  is  the  annual 
report  of  Swift  &  Co.  The  reason  the  other  members  of  the  trust  do  not 
make  reports  is  that  they  are  private  or  close  corporations,  owned  by  the 
families  by  which  they  arc  run.  Swift  &  Co.  for  several  financial  reasons, 
desire  their  employes  and  others  to  hold  their  stock,  which  amounts  to  $35,- 
000,000.  Inasmuch  as  no  one  likes  to  buy  stock  unless  it  is  listed  on  some 
stock  exchange  where  its  value  can  be  known,  and  because  the  stock  exchanges 
demand  statements  of  earnings  to  be  published,  these  annual  statements  are 
issued. 

Commissioner  Garfield's  report  showed  that  the  stock  of  the  various  com- 
panies in  I  In-  "big  six"  amounted  to  over  $90,000,000  stock  and  bonds  of  Swift 
\    Co.      This  stock   is  made  up  as   follows: 

Armour  &  Co.,  $20,000,000,   par  value  $100,  no  bonds. 

Swift    &   Co..  $35,000,000,   par   value  Sl<)<),  $5,000,000   bonds. 

National  Packing  Co.,  $15,000,000,  par  value  $100,  $1,820,000  bonds. 
Schwarzschild  &  Sulzberger  $5,000,000,  par  value  *1<><>,  $3,000,000  bonds. 

Nelson    Morris  &   Co.,  $3,000,000,   par   value  .*1()<),   ,„,  bonds. 

The  Cudahy  Co.,  $7,000,000. 

In    view    of    tbi'    amount    of   business    done    by    these    concerns    the   capital    is 

v<  r\  conservative  as  a  whole.  Here  we  find  one  thing  in  common  with  the 
Standard  Oil  Company.  With  the  possible  exception  of  Swif'i  &  Co.,  this 
■  ipitalization  is  not  on  the  basis  of  most  modern  business  promotions,  includ- 
ing great  amounts  of  "watered"  stock.  If  we  go  n  little  further  into  the 
Garfield  repoti  we  find  the  reason,  the  ownership  is  concentrated  with  the 
packers   themselves   and    was   not    scattered   among   investors.      Had   the   great 


us 


THE  BEEF   TRUST.  157 

$500,000,000  United  States  racking  Company  been  formed,  as  was  planned 
before  tbe  efforts  of  the  packers  went  amiss,  we  can  see  bow  much  "water" 
between  that  amount  and  the  present  $88,000,000  capitalization  would  have 
been  sold  to  the  public. 

The  greatest  capital,  that  of  Swift  &  Co.,  as  a  matter  of  course,  is  found 
where  the  stockholders  are  the  most  numerous.  Even  here,  where  there  are 
6,000  stockholders,  we  find  that  the  average  held  is  about  60  shares,  but  the 
control  of  this  is  with  the  Swift  family.  One  way  of  keeping  this  control  is 
by  selling  stock  to  employes.  Any  one  who  has  worked  for  Swift  &  Co.  a 
short  time  is  expected  to  buy  stock  of  the  company.  This,  of  course,  always 
must  be  voted  according  to  the  desires  of  the  management  of  the  company, 
else  the  employe  could  not  hold  his  position.  Furthermore  the  employe  rarely 
dares  to  sell  out  his  stock  to  take  advantage  of  a  rise  in  the  price,  for  the 
company  has  stated  that  such  action  is  against  its  wishes. 

The  other  companies  in  Hie  combine  also  show  narrow  control.  The  orig- 
inal subscribers  to  Armour  &  Co.  were  only  three  in  number  and  now  the  stock 
is  closely  concentrated.  The  partnership  of  Nelson  Morris  &  Co.  is  of  three 
j»  reons,  Nelson  Morris,  Ira  N.  Morris  and  Edward  Morris.  There  are  only 
.ight  stockholders  in  the  Cudahy  company  and  in  Schwarzschild  &  Sulzberger 
all  but  8,400  shares  of  stock  are  held  by  four  individuals.  The  control  of  the 
National  Tacking  Company  is  narrowly  held,  but  here  is  the  proof  that  there 
is  enough  of  a  "community  of  interest"  among  the  packers  to  justify  the 
brand  of  Beef  Trust.  In  the  board  of  the  National  Packing  Company  we 
find  as  directors  J.  Ogden  Armour  and  P.  A.  Valentine,  of  the  Armour  inter 
efts,  two  of  the  Swifts  and  two  of  the  Morris  family.  The  Garfield  report 
lets  forth  that  Swifl  &  Co.  own  42  per  cent.  Armour  &  Co.  42  per  cent  and 
Morris  &  Co.  interests  12  per  cent  of  this  company,  which  was  meant  to  he 
||„  nucleus  of  the  world  wide  beef  combination.  The  principal  cone. ins  thai 
were  merged  into  the  National  Company  when  the  bigger  trust  was  contem 
plated    were    the   Omaha    Tacking    Company,    the    Hammond    Tacking   Company, 

tin'  Hutchinson  Tacking  Company,  the  Anglo-American  Provision  Company, 
the  United  Dressed  Beef  Company,  the  Fowler  Tacking  Company  and  the 
Continental   Packing  Company. 

The  average  number  of  cattle  slaughtered  by  the  "Tig  Six"  is  12,500,000 

a  year,  or  k">  per  cent  of  the  total  slaughter  of  all  cattle  each  year.  The 
Garfield  report  says  that,  while  the  margin  of  profit  between  the  price  of  live 
cattle  and  of  beef  is  low  rather  than  high,  "it  cannot  he  emphasized  too 
Strongly    that    changes   in    the   margin    are  of   little   yalue    as   a    basis    for  judging 


L58 


THE   BEEF   TRUST. 


the   movement    ot*    profits.     This   may    readily    be   appreciated    from   the   mere 
fact  thai  on  the  average  only  54  per  cent    to  57  per  cent  of  the  Live  weight 
ittle  is  retained  in  dressed  beef." 

A.s  in  every  other  sort  of  monopoly,  the  Beef  Trust  gained  its  ascendency 
through  a  special  privilege.  Of  course  there  was  the  usual  concentration  of 
control  of  the  implements  of  the  business,  such  ;is  buying  in  many  small  plants, 
reducing  expenses  by  operating  on  a  large  scale,  etc.     But  it  seems  to  be  an 


MAIN  ENTRANCE   TO  THE  CHICAGO  STOCK  YARDS. 

Thi>  i^i    w:is    taken    during    the    [ntemational     Live    Stock    Exposition,    which 

is   held   yearly,    with    representation    from    all    parts   of    the  civilized   world.      Here    it    is   that 

.     -     stock-raisers  and   breeders  throughout   America   exhibit  the  results 

of  th'-ir  skill  in  feeding  and  breeding  stock,  judgment  being  passed  by  experts,  and  premiums 

cordingly. 


Wished  fact  that  the  control  of  the  beef,  pork,  mutton,  poultry,  fruit,  egg 
and  dairy  trade  of  most  of  the  great  centers  of  the  country  in  the  hands  of 
the  Beef  Trust  came  about   through  the  private  car  system.     Indeed,  investi- 

ions  conducted  by  the  railways  before  the  Interstate  Commerce  Commission 
in  Chicago  brought  out  evidence  of  great  abuses  by  which  the  trust  thrived 
on  rebates  to  a   similar  degree  to  that  when   the   Standard  Oil  Company  was 


THE  BEEF   TRUST.  159 

able  to  grasp  the  actual  monopoly  of  the  oil  trade  of  the  country.  The  pri- 
vate car  line  arose  about  thirty  years  ago  by  reason  of  a  necessity  for  some 
means  of  transporting  animal  products  by  rail  to  distant  cities.  Two  men 
were  prominent  in  founding  this  system,  which  rapidly  grew  into  the  refrig- 
erator-car system  known  to  all  people  today.  These  Avere  Gustavus  F.  Swift, 
founder  of  Swift  &  Co.,  and  Nelson  Morris,  head  of  the  wing  of  the  Beef 
Trust  of  that  name.  The  latter  for  some  time  tried  to  freeze  meat  and  then 
ship  it  across  the  country.  This  was  not  satisfactory  in  warm  weather.  Swift 
took  up  a  scheme  by  which  a  refrigerator  car  invented  by  a  man  named  Tif- 
fany, could  be  operated  summer  and  winter.  This  project  met  with  a  great 
deal  of  skepticism  on  the  part  of  other  packers  and  prejudice  on  the  part  of 
flie  butchers  all  over  the  country,  who  saw  the  future  when  the  Beef  Trust 
would  be  able  to  ship  meat  everywhere  and  undermine  smaller  businesses.  This 
was  exactly  what  happened.  People  in  the  East  especially  soon  found  that 
Chicago  beef  was  better,  even  when  shipped  great  distances,  than  that  which 
could  be  procured  at  home.  The  result  was  the  speedy  establishment  of  branch 
offices  and  markets  over  many  sections  of  the  country.  When  local  butchers 
tried  to  fight  .by  competition  the  trust  simply  bought  them  out  if  they  were 
of  a  Bize  to  be  worth  while,  or  lowered  prices  to  such  a  ruinous  figure  that 
competition  dwindled  and  the  field  was  left  free  to  the  Trust.  Nothing  served 
to  concentrate  trade  and  to  create  a  widely  diversified  business  as  did  this.  In 
a  very  short  time  the  big  packinghouse  in  Chicago  had  grown  from  a  simple 
butcher  shop  to  an  establishment  with  sixty  five  departments  and  several  side 
issues.  The  amount  of  business  of  all  concerns  increased,  as  will  be  seen  from 
the    following    table    ranging   over   fifty    years   of    transactions: 

No.  ofestab-     Amt.  cap.  Cost  of  value  of 

lishments.  invested.  materials  used.  products. 

1000 .- 921       $189,198,26 1  $688,588,577  $785,562,438 

1890 1,1  is  116,887,504  l«80,962,211  561,611,668 

1880 «7'2           $,419,213  803,562,415  1.45,885,894 

1870 768          l.l  l-'-"i  fc,692  61,67  1,02  V  75,826,500 

I860 259          10,158,362  23,564,488  29,441,776 

I860...                 ...       L85            3,482,500  9,451,096  11,981,642 

Of    COUrSe    greal     economies    were    effected    by     such    M     system.        Shipments    of 

cattle   on    the   hoof   declined    and   dressed    beef   shipments    increased.     Branch 
slaughtering  plants  were  started  in  man}   sections  of  the  country  near  the  cat 
tie  ranges  to  save  shipmenl  as  much  as  possible.     This  evolution  worked  revolu- 
tion   elsewhere.       .\s   soon   as    it    was   seen    that    the    refrigerator   car   could    he    used 


HiD 


THE   BEEF   TRUST. 


to  ship  perishable  meat,  there  was  a  demand  for  shipments  of  eggs,  fruit, 
dressed  poultry,  etc.  With  the  discovery  thai  eggs  could  be  kept  in  cold 
storage  for  a  year  or  more  without  spoiling,  and  thai  poultry  could  be  frozen 
and  kepi  as  long  a  time,  the  packers  began  to  corner  the  market  in  these 
commodities  win  never  and  wherever  possible.  With  this  development  there 
arose  numerous  refrigerator  car  lines.  Many  of  them  were  independent  for  a 
time,  hut   usual   methods  soon   brought   most   of  them   under  the  control  of  the 


MAKING    MUSIC    STRINGS— STRINGS    FOR    TENNIS    RAQUETS,    ETC. 

The  gut  strings  are  spun   from  the  intestines  of  sheep,  and  there  are  two  million  farmers 
in   the    United   States    who    raise   forty-three   million  sheep  annually.     The   use  of  the   sheep 
this    purpose    indicates   how    every    part    of   an   animal    is   used   for   the   henent 
inkind       It    is  a   common    Idea    that    violin  strings  are  made  from  a  cat — hence   the  word 
t"   is   an    Italian    word,    ami    really    means    the    inter-breeding   of   the   mountain 
goat  Our  own  "Uncle  Sam"  perverted  the  term,  and  the  govern- 

ment  in  i-  still    lists  gut  music  strings  as   "cat-gut."     Violin  and  other  music 

«tring« — also    strings    for    the    most    expensive    tennis    raquets,    etc.,    are    manufactured    from 
|.    by   a    treating    and    spinning    process.      They   are    exported   to   all   parts 
Id   by    the   rnai.  P.    F\    Turner. 


principal    packers   in   the    Beef   Trust.      There  are  now   four   principal   groups 
of  these  trusi   private  ear  lines  as  follows: 

our  Group — The  Armour  Refrigerator  Line;  The  Armour  Tacking 
Company;  Armour  &  Co.;  Fruit-Growers'  Express;  Kansas  City  Fruit  Express; 
routine, ital  Fruit  Express;  Boyd,  Lyman  &  Co.;  Kansas  City  Dressed  Beef 
Line;    Barbarossa  Refrigerator  Line;    Tropical  Refrigerator  Express. 


THE  BEEF   TRUST. 


161 


Swift  Group — Swift  Refrigerator  Line:  California  Fruit  Transportation; 
Continental  Fruit  Transportation:    Libby,  McNeil  &  Libby. 

Morris  Group — Morris  Refrigerator  Line;  Nelson  Morris  <V  Co.;  American 
Live  Stock   Company  :     X.   K.    Fairbanks. 

Hammond  Group — George  H.  Hammond  &  Co.;  National  Car  Line; 
Anglo-American   Refrigerator  Line. 

The  Garfield  report  stated  that  of  some  50,000  refrigerator  ears  in  the 
United  States  these  groups  controlled  about  25,000.  Other  estimates  have 
put  the  number  controlled  nearer  40,000  cars.  Such  power  placed  in  the 
hands  of  a   group  of  men  inspired  awe  even   in  the  railways.      By  threats  of 


A    BEPRIGERATOS    CAR   FOR    SHIPPING    MEATS. 

AH  t  packing  houses  own  their  own  cars  for  transporting  their  products  In  a  clean 

and  sanitary  condition. 

diverting  business  awaj  from  one  road  to  another  the  private-car  lines  secured 
'  concessions  from  the  roads.  Mileage  was  forced  to  be  paid  the  private 
line*,  bv  the  roads  on  cars  whether  loaded  or  empty.  Cars  could  not  be  loaded 
uith  other  than  the  packers'  own  freight  and  the  amount  of  this  freight  was 
limited  bv  the  packers  to  a  minimum.  Pressure  was  brought  to  bear  so  that 
freight  on  dressed  beef  and  other  packing  bouse  product-  wras  reduced  much 
belou  corresponding  freight  on  live  stock.  This  caused  cattle  shippers  to 
complain  to  the  government  grievously.  The  result  of  the  extortion  against 
cattle  shippers  and  the  railroads  brought  out  a  great  deal  of  information 
before   the    [nterstate   Commerce   Commission.     J.    W.    Midglej    was   the  com 


163  THE  BEEF   TRUST. 

plainant  for  the  railway-  and  he  characterized  the  members  of  the  Hoof  Trust 
as  "the  mod  arbitrary,  t ho  most   remorseless  thai  have  ever  been  known." 

Not  onlv  won-  rebates  thus  extracted  from  the  railroads  by  an  indirect 
and  possibly  illegal  course,  but  the  produce  markets  wire  made  to  pay  tribute 
to  the  Beef  Trust  through  what  are  termed  "icing  charges."  These  charges 
arose  originally  to  pay  for  the  cost  to  stock  a  car  with  ice  to  preserve  beef 
or  otlur  perishable  goods  in  transit.  With  the  control  of  most  of  the  refrig- 
erator-cars of  the  country  the  produce  men  of  such  great  centers  as  South 
Water  Street,  Chicago,  wore  at  the  mercy  of  the  Beef  Trust.  Goods  had  to 
be  shipped  by  the  line  most  convenient  to  the  fruit  or  produce  territory.  This 
almost  invariably  was  found  to  be  under  the  thumb  of  a  Beef  Trust  captain 
of  industry.  When  icing  charges  first  began  a  railroad  charged  $10  or  $15 
to  "ice"  a  car  from  Missouri  to  Boston.  When  the  monopoly  on  private-car 
lines  was  practically  complete  this  charge  to  an  independent  shipper  was 
raised   to   as   high   as   $100.     Hundreds   of   instances   were   shown   before   the 

eminent  commission  of  abuses  of  this  sort.  In  some  cases  where  shippers 
fought  against  these  charges  the  railways  were  influenced  by  the  Beef  Trust 
managers  to  stop  hauling  freight  for  them.  Sometimes  "icing  charges"  were 
made  on  shipments  when  not  a  pound  of  ice  yvas  used.  It  must  be  borne  in 
mind  that  besides  these  charges  the  regular  freight  rate  also  had  to  be  paid, 
and  whore  the  shipments  had  to  be  hurried  extra  charges  were  made.  These 
rates  were  far  in  excess  of  those  of  the  few  remaining  independent  refrigerator- 
car  lines.  To  show  the  enormous  profits  thus  piled  up  it  may  be  said  that 
experts  have  estimated  the  Armour  lines  alone  make  $72,000  a  day.  The  dif- 
ference  between  charges  by  the  independent  lines  and  the  trust  lines  is  seen 
in  the  rate  of  $80  from  Sacramento  to  Chicago  by  the  trust  and  $45  from  the 
state  of  Washington  to  Chicago  by  the  independents  and  in  the  charge  of 
from  a  town  in  Michigan  by  the  trust  and  $30  from  New  Orleans  to  Chi- 
by   an    independent. 

Thi  worst  setback  the  Beef  Trust  experienced  was  the  injunction  granted 
by  Judgi  Grosscup  and  upheld  by  the  United  States  Supreme  Court.  It  had 
been  charged  before  the  lower  court  that  a  "combination  existed  of  a  dominant 
proportion  of  the  dealers  in  fresh  meats  through  the  United  States  not  to  bid 
against  each  other  in  the  live  stock  markets  of  the  different  states,  to  bid  up 
prices  for  a  few  days  in  order  to  induce  the  cattle  men  to  send  their  stock  to 
the   stock   yards,   to   fix   prices   at  which   they   would   sell   and   to   that   end   to 

trict  shipments  of  meat  when  necessary,  to  establish  a  uniform  rule  of  credit 
to   dealers    arid    to   keep   a   'blacklist,'   to   make   uniform   and   improper   charges 


THE  BEEF   TRUST.  163 

for  cartage,  and  finally  to  get  less  than  lawful  rates  from  the  railroads  to  the 
exclusion  of  competitors."  This  decision  in  favor  of  the  "square  deal"  deter- 
mined that  live  stock  transported  from  one  state  to  another  for  sale  and  held 
there  for  sale  constituted  interstate  commerce  under  the  law.  It  condemned  as 
unlawful  restraint  of  trade  the  combination  between  independent  dealers  to 
suppress  all  competition  in  the  purchase  of  live  stock  between  states,  or  for 
fixing  and  maintaining  uniform  prices  in  the  sale  of  meat  throughout  the 
country,  or  to  obtain  preferential  rates  for  the  transportation  of  their  product 
by  common  carriers.  This  made  it  clear  that  all  combinations  between  inde- 
pendent individuals,  partnerships  or  corporations  engaged  in  interstate  com- 
merce, by  which  competition  between  them  is  suppressed,  fall  under  the  pro- 
hibition of  the  Anti-Trust  Act.  According  to  Judge  Grosscup  this  decision 
"cleared  the  decks  for  the  next  really  great  national  movement — the  organiza- 
tion and  supervision  by  the  nation  itself  or  the  great  corporations  of  the 
future — a  movement  whose  chief  object  will  be  not  so  much  to  control  prices, 
or  merely  to  curb  power,  as  to  bring  corporate  ownership  within  the  reach  and 
reasonable  confidence  of  the  people  at  large,  and  thus  to  re-peopleize  and  repub- 
licanize  again  the  industrial  ownership  of  the  country." 

Shortly  after  this  injunction  was  issued  by  the  court  federal  officers  had 
grounds  for  believing  that  the  injunction  was  being  violated,  that  the  Beef 
Trust  >till  was  doing  business  in  restraint  of  trade.  This  brought  about 
immediate  investigation  by  a  federal  grand  .jury  and  numerous  indictments 
followed.  Agents  of  the  Beef  Trust  vanished,  apparently  in  the  fear  that 
they  might  be  forced  to  testify  against  the  alleged  criminal  doings  of  the 
tni>t  officials.  Some  of  these  nun  were  found  in  Canada  and  brought  back 
by  detectives.     Some  of  them  hastened  to  Europe  and  thus  escaped  the  investi 

gation.  The  head  men  of  the  packing  concerns,  however,  remained  in  reach. 
One   of   the    most    sensational    episodes    in    the   disappearance    of   documents   sup- 

posed  to  have  incriminating  evidence  againsl   the  trust   illegalities  of  the  pack 
,i     was  tli.it   connected   with   the   Etna  Trading  Company,  alleged  to  be  the 
clearing  house  In    which   the  combine  sold   casings.     These  casings  are   made 

principally  from  the  intestine,  of  sheep  and  are  used  lo  cover  sausages.  It 
Was    charged    thai    :i    <  omhiiial  ion    in    restrain!    of    trade    existed    in    this    business 

and   thai   the   Etna   company   did    the   illegal    work.     The  government    officials 
seized    lix    trunks  belonging  to   this   company    after  they   had   been    placed    m 
the  National  Safe  Deposit  Company   in  Chicago.     Suspicion  was  firs!   aroused 
in  this  case  by  the  disappearance  of  the  officials  of  the  company  and  the  hur 
ried  abandonment  of  their  offices  in  the  Fisher  Building  in  Chicago. 


164  THE    BEEF    TRUST. 

B  wise  of  the  wraith  of  the  corporations  under  investigation,  it  was  feared 
pressure  might  be  brought  to  bear  to  la-ad  off  indictments  and  convic- 
tions, eveu  though  they  were  merited  by  the  most  lenient  construction  of  the 
law.  Indeed,  men  connected  with  the  packing  concerns  were  warned  to  keep 
away  from  the  building  where  the  grand  jury  had  its  hearings  and  even  then 
indictments  resulted  from  the  alleged  attempts  of  Beef  Trust  agents  to  tamper 
with  witnesses.  Testimony  was  taken  for  a  long  period  and  witnesses  from 
many  cities  and  from  the  country  were  heard. 

The  character  of  this  testimony  went  to  show  many  things  in  apparent  vio- 
lation of  the  law.  among  others: 

That  the  packers  had  endeavored  to  thwart  the  government,  in  its  attempts 
to  make  an  investigation  by  influencing  testimony  of  witnesses  in  the  employ 
of  the   jiacking  firms. 

That  employes  of  the  packers  were  charged  with  having  attempted  to 
obstruct  the  serving  of  subpoenas  on  employes  of  the  packing  companies 
requiring  them  to  appear  before  the  grand  jury. 

That  record-  seized  by  federal  officials  were  believed  to  reveal  the  existence 
of  an  illegal  trading  arrangement  between  the  Etna  Trading  Company  and  the 
packers  in  the  business  of  handling  sausage  casings. 

That  an  understanding  existed  between  the  packing  companies  and  the  rail- 
mad-  subsequent  to  the  Grosscnp  injunction  and  that  preferential  rates  wen 
given  the  packers  on  freight  shipments. 

IN  rhaps  the  most  serious  fight  made  by  the  packers  was  against  the  effort 
to  prove  that  illegalities  were  common  in  the  relations  with  the  railroads.  Here 
it  was  Armour  &  Company  and  Swift  &  Company  who  suffered  the  brunt  of 
the  investigation,  because  it  was  through  the  private  car  lines  owned  princi- 
pals by  these  concerns  that  it  was  alleged  rebates  were  given  by  the  railways. 
Tin  charge  that  icing  bills  were  inordinate  and  pressed  severely  upon  the  fruit 
shippers  of  the  country,  was  met  by  the  reply  that,  although  Armour  &  Com- 
pany  had  practically  a  monopoly  of  this  business  in  certain  districts,  the  pri- 
vate car  1 1 1 1 .  _  gjed  in  the  interstate  business  publicly  was  not  a*  public  car- 
rier, but  a  private  business.  However,  exorbitant  icing  charges  were  reduced 
in  tin    effort  to  withstand   the  tide  of  public  disapproval. 

Of  the  other  serious  complaints  investigated  with  a  view  to  righting  exist - 

.    tho-c;    which   pointed    to   glaring  injustices  in  the  control  of  the 

price    of    meat-    were    prominent.      Generally    speaking    the   Beef   Trust    was 

charged  with  illegally   manipulating  the  market   for  cattle  on  the  hoof  on  the 

n    and   southern   ranges.      Evidence  showed  that  repeatedly  at  the 


THE    BEEF    TRUST. 


165 


great  central  market  of  Chicago  and  at  the  other  markets  of  St.  Paul,  Sioux 
City,  Omaha,  St.  Joseph,  Mo.,  St.  Louis.  Kansas  City  and  Fort  Worth  every 
.sort  of  means  was  taken  to  favor  the  packers  in  their  quest  of  low  priced  ani- 
mals. 

In  the  same  markets  it  was  charged  that  commission  men  were  influenced 
by  the  packers  to  help  the  trust  in  an  illegal  pursuit  of  trade.  It  was  charged 
that   glaring  examples  of  unfair  dealing  were  found  wherein  the  packers  de- 


r 


i 


s 


AMONG    THE    CATTLE    PENS,    CHICAGO    STOCK    YARDS. 

This  he  Stock    yards,   which   are   the   largest    In   the   world.     They 

com]  ire   25   miles  of  streets  and   alleys   between    the   pens,   38   miles 

troughs  and   .",ii   mi  linn   troughs.     Twenty   trunk   line   railroads  Berve   the 

,  although  within  the  same  the  association   owns   its  own  tracks  and   charges' toll  for  their 

13,000   pens  altogether  and   when   filled   will   hold    120, hogs,    20,000  cattle 

16, Bheep      To   bring   -i    year's   receipts    i<>   the    yards   would    require   a    train    almost 

long  enough  t"  reach  from  New  fork  t"  Ban  Pram 


pressed  prices  of  animals  artificially  by  their  combination  one  d,i\  bo  thai  on 
the  next  they  could  buy  at  their  own  figures.  Cases  were  cited  where  men 
refused  to  take  such  low  prices  and  shipped  their  animals  from  one  city  t<> 
another,  only  to  be  met  by  the  same  prici 

It  also  was  charged  thai  through  combination  with  stock  yards  and  terminal 
railway    companies   heavy   and   arhitrari    terminal   charges  and   switching   ' 


166  THE    BEEF    TRUST. 

\w  ii  exacted  from  shippers  unfairly.  Still  further  the  charge  was  made  thai 
the  Beef  Trusl  illegally  controlled  the  output  of  finished  meat  products  and 
that  the  small  butcher  or  packer  in  the  country  was  constantly  being  squeezed 
out  of  business  1>\  the  combination's  evil  methods.  This  combination  was  said 
to  extend  even  into  the  control  of  the  by-products  of  the  packing  industry  such 
a-  glue,  felt,  blood,  hone  and  glutenous  products. 

The  Chicago    Union   Stock    )'<ird.s. 

It  is  interesting  to  watch  the  process  by  which  the  trainloads  of  live  stock 
arriving  in  the  morning  are  converted  into  dressed  meat,  and  the  other  products 
of  the  packing  houses.  Nearly  all  of  the  shipments  arrive  during  the  fore- 
noon by  way  of  the  Western  railways,  and  of  course  this  is  a  very  busy 
period.  The  outbound  shipments  for  the  Eastern  markets  and  for  export  are 
mostly  made  during  the  afternoon  by  the  Eastern  lines,  so  that  this  again,  is 
another  busy  time  of  day. 

When  a  load  of  cattle  comes  into  the  yards  the  car  is  placed  on  a  side  track, 
and  the  animals  are  unloaded  into  pens  assigned  them  by  the  stock  yards  com- 
pany, which  owns  all  the  facilities  of  the  place.  The  cattle  are  consigned 
from  the  Western  shipper  to  some  commission  man,  who  sells  them  during  the 
day  to  buyers  representing  the  packing  houses.  Government  inspectors  con- 
demn such  stock  as  does  not  meet  the  legal  requirements,  and  then  the  buyers 
take  what  is  needed,  pavi  lg  by  a  weight-ticket  which  can  be  cashed  at  the  bank 
in  the  stock  yards  or  elsewhere.  There  are  two  hundred  of  these  commission 
firms  with  offices  in  the  yards,  where  they  are  prepared  to  do  business  as  an 
intermediary  between  the  shipper  and  the  packer.  At  the  same  time,  the  gov- 
ernmi  nt  is  on  hand  by  its  inspectors,  to  protect  the  public  against  the  use  of 
il   meat. 

1.  rcising  a  supervision  over  the  whole  enterprise  is  the  Stock  Yards  Com- 
pany itself,  which  controls  all  sorts  of  industries  within  the  limits  of  the  yards, 
including  the  hotel  and  restaurants,  the  fire  department,  a  hank,  and  various 
other  branches  of  business  and  comfort.     Of  course  not  all  of  the  :J5,()()0  men 

toyed   in  and  about    the  yards  are  directly   in  the  service  of  the  Stock  Yards 

pany.  Many  thousands  of  them  are  attached  to  the  packing  houses  and 
to  the  officer  of   the  commission   men.      lint   the   whole  undertaking  is  so  closely 

dated  and  so  perfectly  organized  as  to  he  generally  included  in  the  single 
phrase,  the-  ^tock   yards   industry. 


CHAPTER    XI 
THE  GREATEST  OF  ALL  MONOPOLIES— THE  RAILROAD  TRUST. 

The  Railroads  Are  the  World's  Greatest  Arteries  of  Commerce — Six  S //stems 
Control  or  Dominate  More  than  Half  the  Railway  Mileage  of  the  Country 
— Rockefeller  and  Railways  Almost  as  Suggestive  as  Rockefeller  and 
Standard  Oil — A  Great  "Community  of  Interests"  Has  Grown  Up  in  the 
Natural  Monopoly  of  Railroad  Business. 

•There  is  no  monopoly  which  is  so  insidious  and  all  prevailing  as  the  railroad 
monopoly.  There  is  not  one  thing  which  enters  into  every  article  of  luxury  and 
every  article  of  necessity  like  the  railway  rate.  There  is  not  one  thing  which 
can  take  a  penny  from  the  pocket  of  the  poor  man  and  put  it,  together  with 
other  pennies,  into  the  enormous  whole  and  deposit  it  to  the  account  of  the  multi- 


FREIOHT     YARDS     AND     ENTRANCE     TO     CHICAGO  RIVER. 

Hen        shown  the  [llinols  Central,  Michigan  Central  and  Central  fi 

and   tl                                      from    Lake   Michigan   to   the  Chicago   River.  Also   the   Lire 

right    ..i    entrance     Columbia    Boal   Club   lions.'  and   small  Railing   yachts, 
the    distance    lighthouse    Indicating    tin-    entrance    t"    the    harbor, 

167 


t  yards 
Saving 

and   in 


L68  THE    RAILROAD  TRUST. 

millionaire  as  does  the  railway  rate."-  |  From  an  address  delivered  by  Interstate 
Commerce  Commissioner  Prout)  before  the  Union  League  Club  of  Chicago.] 
Who  owns  these  railways  which,  once  the  gift  of  the  people,  now  are  the 
ts  l>\  which  tribute  is  collected  over  the  Length  and  breadth  of  the  land 
until  a  whole  nation  arose  in  protest  against  the  arbitrary  power  and  abuse 
thereof:  Once  more  we  must  go  back  to  the  family  or  families  of  the  financial 
world  which  we  have  said  find  their  greatesi  asset  in  the  savings  of  the  people — 
to  the  money  trust,  to  "Standard  Oil."  to  the  insurance  trust,  to  the  beef  trust 
and  to  the  numerous  financial  and  industrial  affiliations  which  form  the  great  web 
of  power  called  "capital"  in  the  United  States. 

It  would  hardlv  be  accurate  to  say  that  absolute  control  of  the  211,000 
mihs  o\'  railway  lines  in  this  country  are  in  the  hands  of  half  a  dozen  men,  for 
history  has  shown  that  hundreds  of  thousands  of  individual  citizens  of  the 
country  have  invested  in  the  securities  which  own  or  have  a  lien  on  these  great 
national  highways.  History  also  has  shown  how,  when  the  railway  magnate  is 
too  lax  in  being  a  "dummy"  director  with  only  a  few  shares  of  stock  in  his 
actual  control,  some  shrewd  speculator  has  swooped  down  upon  him  in  a  trice  and 
d  control  of  his  pit  project  through  a  stock  market  coup.  Furthermore, 
there  have  been  times  when  through  some  such  shallow  agreement  as  a  "voting 
trust"  a  railway  has  been  dominated  for  a  number  of  years  by  men  who  really 
owned  so  little  of  its  stock  as  not  to  be  prompted  to  treat  the  problems  of  the 
stockholders  other  than  selfishly,  and  then  the  small  and  numerous  owners  of 
perhaps  discredited  stock  have  risen  in  their  right  and  overthrown  the  "trust"  in 
that  particular  road.     Hut  these  are  exceptions. 

If  you  would  know  how  the  greatest  of  the  world's  arteries  of  commerce  are 
controlled,  glance  at  the  following  table  showing  the  domination  b}'  six  systems 
of  more  than  half  the  railway  mileage  of  the  country — interests  which  are  so 
fasl  feeling  the  hand  of  John  I).  Rockefeller  and  "Standard  Oil"  that  before 
tin-  volume  appears  in  print  Rockefeller  and  railways  may  be  almost  as  sugges- 
tive as  Rockefeller  and  "Standard  Oil": 

Mileage. 

V<  tinsylvahia    19,000 

VandeVbilt     23,000 

Hill  system   21,000 

Harriman    16,000 

Gould    20,000 

Rod?    [sland    16,000 

Total    115,000 

Total  mileage  in  country 211,000 


THE    RAILROAD    TRUST.  169 

Revenue  of  all  roads $1,900,000,000 

Revenue  of  above  six .    1,200,000,000 

Capital  of  all  roads $12,000,000,000 

Capital  of  above  six 8,000,000,000 

Already  financiers  have  brought  about  an  interlacing  of  the  boards  of  direc- 
tors and  stock  ownership  of  these  and  other  railroads  of  the  country  until  the 
power  of  the  "Standard  Oil"  interests  is  openly  recognized,  though  perhaps  it 
is  not  yet  all  powerful,  in  the  management  of  about  two-thirds  of  the  mileage  of 
the  country.  The  road  most  recently  to  fall  under  this  group  is  the  Atchison. 
Topeka  and  Santa  Fe,  which  for  a  long  time  was  considered  the  only  great 
independent  system  of  the  country.  When  "Standard  Oil"  directors  were  elected 
to  its  board  the  following  roster  was  made  up  .showing  what  roads  are  influenced 
from  No.  26  Broadway,  New  York,  the  home  of  the  Standard  Oil  company  and 
the  Rockefeller  party : 

Mileage. 

Atchison    8,00:5 

Baltimore  and  Ohio 4,897 

Chicago  and   Alton 91  5 

Chicago,  Milwaukee  and  St.   Paul 6,682 

Chicago  and    Northwestern 7,365 

Rock  Island  System    16,000 

Delaware,  Lackawanna  and  Western 947 

Delaware  and  Hudson   SS2 1- 

Denver  and  Rio  Grande 2,460 

Erie    2,556 

Illinois  Central 4,801 

Kansas  City  Southern 889 

Missouri,  Kansas  and  Texas 2.718 

Missouri  Pacific  System 20,000 

V  ,  Y..,k  Central 11.17s 

V  u  York,  New  Haven  and  Hartford 2.0:*7 

V  a  York,  Ontario  and  Western 549 

Northern  Securities 18,920 

Oregon   Railroad  ami   Navigation 1,151 

Oregon  Shorl    Line   1,888 

Reading    2,1  I  I 

Southern    Pacific    9,621 

Union  Pacific 9,105 

Total    181,580 


170  THE  RAILROAD  TRUST, 

But  as  yet  "Standard  Oil"  influence,  while  it  is  powerful  in  these  railways, 
finds  the  family  pride  o['  the  Vanderbilts  and  the  Goulds  and  the  business  jeal- 
ousies oi'  inaii\  another  rrailway  interest  of  such  great  importance  that  alliances, 
both  independent  and  interlaced,  have  been  brought  about  with  many  of  them, 
as  is  seen  above.  And  just  now  the  alliance  of  greatest  significance  is  that  with 
Edward  II.  Harriman,  head  of  the  Union  Pacific,  Southern  Pacific,  Illinois 
Central,  Chicago  iV  Alton  and  kindred  roads,  and  member  of  the  powerful  New- 
York  banking  firm  of  Kulm,  Loeb  &  Co. 

E.  II.  Harriman  had  one  ambition — that  to  control  all  the  transcontinental 
railroad  lines  of  America  with  the  exception  of  the  Canadian  Pacific.  This 
ambition  ran  counter  to  the  plans  of  James  J.  Hill,  the  great  president  of  the 

itest  railway  merger  to  date  and  the  far-seeing  developer  of  the  great 
Northwest.  Mr.  Hill,  as  head  of  the  Great  Northern  system  with  its  outlet  on 
the  Pacific  Northwest,  found  Mr.  Ilarriman's  Union  Pacific  road  encroaching 
on  his  territory,  and  to  gain  vantage  ground  bought  the  Chicago,  Burlington 
&  Quincy  a-  a  feeder  into  Chicago  territory.  Whereupon  Mr.  Harriman  con- 
ceived  the  idea  of  swooping  up  the  road  that  paralleled  Hill's  Great  Northern — 
the  Northern  Pacific.  But  Hill  saw  the  opportunity  at  the  same  instant,  and, 
with  the  mighty  banking  prestige  and  financial  power  of  J.  P.  Morgan  behind 
him.  bought  for  control  the  stock  of  the  Northern  Pacific  as  fast  as  did  Har- 
riman with  his  hacking  of  Kuhn,  Loeb  &  Co.  The  result  was  the  celebrated 
panic  on  the  New  York  Stock  Exchange  of  May  9,  1901,  when  Northern  Pacific 
stock  was  cornered  and  $100  shares  sold  as  high  as  $1,000.  Out  of  this 
turmoil  in  which  for  a  day  half  the  banks  and  brokerage  houses  of  the 
country  were  technically  bankrupt,  came  the  discovery  that  neither  Hill  nor 
Harriman  could  control  the  western  railway  map.  Then  came  the  arbitration 
and  the  formation  of  the  great  railway  merger — the  $100,000,000  Northern 
ritii  -  company — with  -James  J.  Hill  as  president.  This  was  a  blow  to  the 
prestige  of  Harriman,  for  he  had  to  he  content  with  accepting  a  great  amount 
of  the  stock   of   the   Northern   Securities  company  to  be  owned  by  his  Union 

tic  stockholdi  rs. 

But  a  day  came  when  Harriman  was  to  win,  at  least  in  one  sense.  President 
Roosevelt  coneeiyed  the  idea  that  this  merger  company  was  illegal.  Without 
so  much  as  warning  the  railway  magnates  of  this,  he  instructed  the  law  depart- 
ment  of   the   government   to   proceed  against   the  company  to  ascertain   if  his 

jeeture  was  good  law.  It  was.  The  United  States  Supreme  Court  finally 
ruled  that  the  Northern  Securities  company  in  substance  was  a  trust  under  the 
law  and  hence  must  he  dissolved. 


THE  RAILROAD   TRUST. 


171 


When  it  became  apparent  that  a  dissolution  would  take  place  there  was  a 
long  legal  tangle  as  to  whether  Hill  or  Harriman  should  be  the  greater  gainer 
in  the  change.  In  some  things  Hill  won,  but  all  the  time  Harriman  was  work- 
ing out  his  ambition  to  dominate  the  railways  of  all  the  West.  There  were  the 
Goulds,  the  Rock  Island  party  and  Hill  to  fight,  but  already  Harriman  had 
put  the  grip  of  his  Union  Pacific  on  the  Oregon  Short  Line  and  Oregon  Rail- 
way and  Navigation  Company,  gaining  control  of  the  route  through  Oregon. 


MICHIGAN  AVENUE,  CHICAGO,  FROM  LAKE  FRONT  PARK. 

Prom  I'i'i  i"  right  the  buildings  are  (1)  Auditorium  Hotel,  (2)  Studebaker  and  Pine 
Arts  Buildings,  (3)  Chicago  Club,  (4)  Victoria  Hotel,  ■ .'» \  Stratford  Hotel,  (6)  Railway 
Exchange   Building,    <~>    Building  just   erected   by  popular   subscription   for  the   Bole   u 

the   'l'h lore   Thomas   Orchestra,    (8)     Pullman    r.uildiiiK     ninVes    <>f    the    Pullman    Car    Co., 

and    Headquarters  of  the    United  States   Army,    Department    of   the   Lakes,    (9)    Peoples  Qas 
Light  A  Coke  Co.,  (10)   Building  with  tower— Montgomery  Ward  &  Co.,  ill)  Art  Institute. 

He  had  acquired  also  for  the  Union  Pacific,  the  Centra]  Pacific  and  the  South- 
ern Pacific.  Then,  with  the  Rockefeller  party,  he  secured  partial  domination 
of  the  one  last  great  independent  system,  the  Atchison,  Topeka  &  Santa  Fe. 
II  interest  in  Northern  Pacific  from  panic  times  was  little  Bhorl  of  control  and 
his  purchase  of  the  San  Pedro,  Los  Angeles  and  Pacific  gave  Harriman  a  voice 
in  six  out  of  seven  existing  Pacific  Coast  routes  in  American  territory.  Indeed, 
■  competent  authority,  the  Wall  Street  Journal  once  Baid,  Mr.  Harriman 
made  the  Union  Pacific  "the  most  stupendous  weapon  of  conquest  ever  wielded 


i;j  fill.   RAILROAD  TRUST. 

Iiv  a  single  financial  interesl  in  this  or  anj  other  country."     The  credit  of  the 

Union  Pacific,  in  fact,  conquered  the  West  for  one  man      Edward  II.  Harriman. 

It  made  him  dictator  of  all  railroad  policies  on  the  Pacific  Coast  from  Port- 

lanil  to  thr  Gulf  of  California.  It  placed  him  in  almost  undisputed  control 
of  all  public  transportation  from  American  producers  to  oriental  markets.  He 
became  the  arbiter  of  the  rate  situation  between  Chicago  and  San  Francisco. 
HLis  policy  was  supreme  on  over  25,000  miles  of  the  best  railroads  in  the  West, 
ami  ruled  tin  destinies  of  companies  capitalized  at  more  than  $1,500,000,000. 

Ili-—  own  weapon,  past,  present  and  future,  was  the  Union  Pacific  credit. 
That  credit  was  fostered  by  the  most  careful  of  financial  methods;  built  up  by 
the  most  progressive  operating  methods  on  the  continent,  borrowed  from  J.  J. 
Hill,  it  is  true,  but  adapted  and  carried  farther;  handled,  guarded  and  enhanced 
by  the  skill  o\'  Messrs.  Kuhn.  I.oeb  $  Co..  bankers  extraordinary  to  Union 
Pacific:    and   ultimately,   guided   and   controlled  by   the   railroad   and   financial 

ius  of   E.   H.   Harriman. 

There  were  no  great  mistakes.  The  decided  defeat  at  the  hands  of  J.  J. 
Hill  and  J.  P.  Morgan  resulted  in  turning  what  was  intended  to  be  the  capture 
of  Northern  Pacific  into  an  investment  that  later  netted  a  profit  of  50  per  cent. 
This  was  a  moral  defeat,  but  an  actual  victory.  The  purchase  of  Southern 
Pacific  and  the  long  period  of  tremendous  expense  in  building  up  the  Southern, 
Central  and  Union  Pacific  properties,  resulted  in  great  and  immediate  benefits. 

Tin  Harriman  policy  has  been  so  far  uniformly  successful.  The  question 
of  the  hour  is  how  much  farther  the  policy  is  to  be  followed.  The  purchase 
of  a  large  interest  in  Atchison  and  practical  control  of  the  San  Pedro,  Los 
Angeles  and  Salt  Lake  Railroad  appeared  to  be  the  culmination  of  his  plans  for 
expansion  of  property  west  of  the  Great  Divide.  Since  that  time  rumor  has 
credited  the  Harriman  forces  with  plans  to  take  control  of  Chicago  and  North- 
western and  of  New   York   Central. 

It   i>  the  prospect  of  this  greater  merger  which  was  the  bone  of  contention 

of    the    railway    financial    powers    during    1905.      The    federal    authorities   had 

declared  thai  with  the  Sherman  anti-trust  law  on  the  statute  books  the  Northern 

riti(  s  combination  could  not  stand  legally.      Put  if  there  was  not  one  method 

mother.      As  yet    no  law   has  been   framed   placing  obstacles  in  the 

oi   actual  control  of  competing  railway  lines  through  dominating  owner- 

Th  s  was  the  opportunity  that  was  seized  by  the  great  railway  powers  at 

•    opportunity  after  the  Northern  Securities  company  was  declared 

that    time    there    was    the    interlacing   0f    interests   until    Union 

Pacific  dominated  the  transcontinental  business  of  the  United  States. 


THE   RAILROAD  TRUST.  173 

About  this  time  Mr.  Harriman  and  the  Rockefellers  decided  the  Vanderbill 

lines  were  choice  plums  of  the  railway  tree.  Forthwith  these  interests  began 
forming  a  fresh  set  of  alliances,  until  now  it  would  be  possible  to  extend  Har- 
riman-Rockefeller  influence  from  the  Atlantic  to  the  Pacific  over  some  40,000 
miles  of  road,  controlling  property  worth  several  billions  and  which  originate 
traffic  valued  at  more  than  $300,000,000  annually.  Let  us  glance  at  the  fol- 
lowing table  and  see  what  one  man's  ambition  craved: 

Mileage.  Stock.  Bonds. 

New  York  Central  system 3,500     $    200,000,000     $    187,000,000 

Big  Four '.. 2,500  37,000,000  63,000,000 

Pittsburg  &  Lake  Erie 200  4,000,000  10,000.000 

Lake  Shore    1,500  50,000,000  75,000,000 

.Michigan    Central    1,050  19,000,000  32,000,000 

Nickel  Plate 550  30,000,000  22,000,000 

Chicago  &    Northwestern 5,576  100,000.000  170,000,000 

Fremont,  Flkhorn  &  M.  V 1,362  2,000,000  18,000,000 

Lake  Erie  .V  Western 900  24,000,000  12,000,000 

Omaha  Line    1,590  34,000,000  33.000,000 

Indiana,  Illinois  .V  Lowa 305  5,000,000  5.500,000 

Union  Pacific 7,000  264,000,000  331 .270,000 

Southern    Pacific    9,016  200,000.000  100,000.000 

Illinois  Central    4.500  76.000.000  156,000,000 

K.  C.,P.&G S40  9.000.000  is. ooo.ooo 

Total 40,989     $1 .054,000,000     ^1 ,232.770.000 

That  a  great  "community  of  interests"  has  grown  up  in  the  natural  mo- 
nopoly  of  railroad  business  is  apparent.  How  much  further  it  \\;ll  go  remains 
t<>  !)'•  Been.  Undoubtedly  it  can  go  ton  far  toward  one  central  control  in  tin 
railroad  affairs  of  the  United  States.  Beyond  doubt  the  tendency  is  in  that 
direction  not  in  defiance  of  law  for  the  law  on  combinations  is  not  being 
violated       hut    in    spite  of   the  Constitution   and    federal    statutes   and.   in   a   sense. 

under  their  din  ction  and  authority . 

Ami  yei    we  may  expeel    to  see  many  an  attempt    to  check   the  movement. 

Tile    practical    monopoly    c.f    tin-    Pacific    routes    I  >  \    one    influence    is   regarded.   Ixitli 

i      '    and   Wist,  as  :i  dangerous  and  revolutionary  step.        Even   the   gradual 
influi  in  i    at    work   to  control  the  Atchison  threatens  to  bring  a   hosl   of  forces 
linsi  Mr.  Harriman. 

'  p  'o  the  time  of  the  dissolution  of  the  Northern  Securities  company  tin 
greatest  combination  outside  flu-  field  dominated  by  the  Harriman  Rockefeller 
interests,  and  even  in  Borai  degree  affiliated  in  it,  was  that  of  the  Pennsylvania. 
It  was  madi   up  as  follows ; 


174  THE    RAILROAD  TRUST. 

Mileage.          Slock.  Bonds. 

Pennsylvania          10*550     $390,000,000  $285,000,000 

Reading  Railwav       1,455       140,000,000  96,000,000 

(  hesapeake  &  Ohio 1,561          60,000,000  76,000,000 

Baltimore  &  Ohio 4,368       104,000,000  225,000,000 

Vandalia              158           3,900,000  4,100,000 

N\u  York.  Nov  Haven  &  Hartford 2^037          54,000,000  54,000,000 

Total    20,129     $751,900,000  $690,100,000 

-  iid  onlv  to  the  Pennsylvania  was  the  combination  of  lines  represented 
bj  the  $400,000,000  Northern  Securities  Company  and  controlled  by  the  Mor- 
gan-Hill coterie.     This  combination  as  it  existed  before  it  was  declared  illegal, 

u  as  as   follow  S  : 

Mileage.           Stock.  Bonds. 

Northern  Pacific  Co 4,956     $155,000,000  $173,000,000 

(in  at   Northern    5,451        125,000,000  96,000,000 

Chicago,   Burlington  &  Quincy 9,000       215,000,000      

Total 19,407     $495,000,000  $269,000,000 

The  Rock  Island  system,  which  the  Moore  Brothers,  D.  G.  Reid  and  W. 
H.  Leeds  haw  constructed  during  the  past  few  years,  stands  next  and  is  made 
up  about  as  follows  : 

Mileage.           Stock.  Bonds. 

Rock  [sland  Co.  (new) $150,000,000      

Rock  Island  Co.  (old) 7,038       125,000,000  $  75,000,000 

'Frisco    Line    3,414       110,000,000  51,000,000 

1    istern   Illinois 738         19,000,000  23,000,000 

(  hi.  ,  go  &  Alton 920         60,000,000  20,000,000 

Total   12,110     $464,000,000  $169,000,000 

The  Gould  system  stands  close  to  the  Rock  Island  in  size  and  importance 
and   i>  made   up  of  the   following   roads: 

Mileage.            Stock.  Bonds. 

ouri  Pacific 5,909     $  77,000,000  $  64,000,000 

Wabash '. 2,367         52,000,000  90,000,000 

Internationa]  .V  Great  Northern 928          10,000,000  24,000,000 

8    Pacific 1,684         39,000,000  60,000,000 

Rio  Grande 1,091          61,000,000  49,500,000 

Uio  Grand<    Western 662         17,500,000  29,000,000 

W<  st  rn   Maryland    257            1,000,000  9,000,000 

Ann   Arbor    291             7,250,000  7,700,000 

Total    13,189     $264,750,000  $333,200,000 


THE   RAILROAD    TRUST.  175 

In  the  South  the  Morgan  interests  have  been  actively  gathering  the  rail- 
roads into  allied  groups.  The  largest  southern  merger  may  be  called  the  Mor- 
gan-Southern Railway  system,  and  is  stated  to  be  made  up  of  the  following 
lines : 

Mileage.  Stock.  Bonds. 

Southern  Railway    6,728     $184,000,000     $174,000,000 

Atlantic  Coast  Line 4,437  33,000,000  30,000,000 

Louisville  &  Nashville. 5,324  60,000,000       111,000,000 

Monon  Line    546  15,500,000  15,500,000 

Georgia  Central   1 ,844  5,000,000  49,000,000 

Total    18,879     $297,500,000     $279,500,000 

Independent  of  the  new  merger  are  what  are  known  as  the  Rockefeller  roads. 
These  may  be  thrown  into  the  greater  alliance  with  llarriman  at  any  time  and 
may  l>«-  stated  to  be  the  following: 

Mileage.  Stock.  Bonds. 

Chicago,  Milwaukee  &  St.  Paul 6,746  $100,000,000  $256,000,000 

Missouri,  Kansas  .V-  Texas 2,500  68,000,000  87,000,000 

Wisconsin  Central 1.047  30,000,000  29,000,000 

Total    10.293     $198,000,000     $372,000,000 


THE     STABLES     OP     A    MILLIONAIRE. 


CHAPTER  XII 
DANGER  IN  RAILWAY  MONOPOLY. 

The  Railway  Is  the  Mother  of  Other  Monopolies — Efforts  to  Regulate  Hates 
and  Prevent  Discrimination  in  Favor  of  Trust  Combinations  as  Against 
Small  Shippers — "The  Freight  Hate  is  the  Life-blood  of  Commercial 
Activity" — "The  Function  of  a  Government  Is  to  (Free  Every  Man  a  Fair 
(  hanee." 

That  the  public  has  seen  with  awe  and  fear  the  danger  of  the  abuse  of  the 
monopoly  powers  of  the  Railway  Trust  is  patent  from  the  fact  that  when  Pres- 
ident Roosevelt  in  1904  asked  Congress  to  give  the  Interstate  Commerce  Com 
mission  the  power  of  regulating  railway  freight  rates,  the  public  almost  as  a 
man  applauded  the  innovation  to  the  echo.  Df  course  there  arc  always  two 
Bides  to  a  question  and  the  railway  presidents  argued  against  a  bill  that  was 
passed  in  the  House  of  Representatives  until  the  Senate  declined  to  concur  in 
enacting  such  a  law.  Nevertheless  the  demand  for  the  "square  dear''  as  against 
freight  rebates,  discrimination  on  terminal,  private  car  line  abuses  and  the  like 
had  its  cll'ect  in  stopping  practices  which  gave  the  big  trust  better  terms  than 
the  small  shipper. 

Interstate  Commerce  Commissioner  Prouty,  who  was  a  foremost  investigator 
in  railway  abuses,  described  some  of  the  dangers  of  the  situation  which  Presi- 
dent Roosevelt  and  the  country  at  large  asked  to  have  removed.  Here  is  what 
he  said  : 

'The  typical  industrial  monopoly  is  the  Standard  Oil  company,  and  that 
corporation    has    today    almost     a.  perfect     monopoly.       Bui     every     independent 

refinery  can  attack  it  in  its  most  vita]  point.  The  maintenance  of  that  monopoly 
is  only  at  the  price  of  eternal  vigilance. 

'"Take  the  United  Stales  Steel  corporation.  Today  it  controls  half  the  iron 
output  of  the  United  Mates,  and  every  new  furnace,  every  mill  is  aiming  at  the 

vitalfl    of    that    corporation.  Unless    tin     United    Stales    Steel    corporation    has 

Borne  advantage  in  transportation  facilities,  or  unless  it  can  control  the  raw 
material  out  of  which  the  finished  product  is  made,  I  doubt  if  that  corporation, 
with  all  its  enormous  power,  can  retain  its  monopoly. 

"Now,  take  the  railroad-  toda\  between  Chicago  and  New  York.     They  are 

177 


178  DANGER    IN    RAILWAY    MONOPOLY. 

built.  No  other  trunk  railroad  ever  "ill  be  built  to  compete  with  them — at 
in  the  near  future.     Development   will  be  by  enlarging  and  developing 

-    same  systems. 

"The   Pennsylvania  system  never  can  fall  apart.     The  ownership  of  that 

ystem  may   change;    the  management  of  that  system  may  change,  but  that 

lous  system  controls  today  one-fifth  of  all  the  tonnage,  one-fifth  of  all  the 

ss  receipts,  one-fifth  of  all  the  passengers  carried  in  the  United  States.     It 

system  by  itself  forever.  There  is  another  thing.  The  way  in  which  these 
combinations  have  been  built  up  means  that  almost  of  necessity  this  monopoly 
must  increase  rather  than  diminish  in  the  near  future. 

"We  have  heard  in  these  last  years  a  great  deal  about  trusts.  What  is  the 
matter  with  the  trust?  What  is  the  harm  in  a  monopoly?  There  are  other  evils, 
but  the  principal  evil  is  this:  that  it  enables  the  man  who  has  the  monopoly  to 
take  from  the  man  who  requires  the  service  of  the  article  he  has  to  sell  more 
than  a  just  price. 

"Not  only  is  the  railway  the  greatest  monopoly  by  far  of  itself,  but  it  is  the 
mother  of  countless  other  monopolies.  It  is  well  understood  that  an  advantage 
in  the  railway  rate  means  life  to  one  competitor  and  death  to  another  competitor, 
and  the  advantage  is  not  of  necessity  from  the  payment  of  the  rebate.  There 
may  lie.  and  tin  re  are,  discriminations  in  the  published  schedule  just  as  deadly 
as  those  which  arise  out  of  a  departure  from  the  published  schedule.  The 
Standard  Oil  company  grew  and  flourished  on  rebates  in  its  infancy.  The  boast 
of  tin  Standard  Oil  company  today  is  that  it  takes  no  rebates.  It  does  what 
i>  better  than  take  rebates;  it  makes  the  schedule. 

"Mr.  Rockefeller  today  has  a  potent  influence  in  the  railroad  operations  of 
this  country.  Mr.  Morgan  has  a  most  potential  influence  in  the  railroad  opera- 
tion- of  this  country.  And  while  the  Standard  Oil  company  may  not  and  does 
not  take  r<  bates,  it  enjoys  advantages  in  the  public  schedules  which  mean  hun- 
dreds  of  thousands  of  dollars — I  presume  millions  of  dollars — -annually  to  that 
company. 

"Now.  here,  gentlemen,  you  have  the  problem.      You  have  first  the  greatest 

monopoly   then    i-:    you  have  second  the  discrimination  which  builds  up  other 

lies.      Now,  what    is  the  remedy  for  that?     The  most  natural  thing  in 

•  world  i-  to  say  if  these  combinations  have  produced  that  sort  of  a  monopoly 

stop  tin  combinations;   let  us  break  up  the  combinations.     That  is  a  thing 

i  fan  t  do.  That  remedy  you  can't  have.  You  might  like  it,  you  have 
riven  for  it  in  vain.  You  can't  have  it.  You  must  find  some  other  remedy,  or 
there  can  be  no  remedy. 


DANGER  IX  RAILWAY  MONOPOLY.  179 

"When  the  Interstate  Commerce  Commission  was  investigating  the  Northern 
Securities  merger  I  asked  Mr.  Harriman  what  remedy  a  shipper  had  if  the 
railroad  imposed  upon  him  an  unjust  rate,  and  his  answer  was:  'Let  him 
bring  suit  and  recover  his  damages.'  You  know  that  kind  of  remedy  is  no  rem- 
edy at  all. 

"'Take  the  rate  in  which  this  whole  western  country  is  most  interested— 
the  grain  rate.  That  has  been  advanced  in  the  last  six  years  probably  6  cents 
a  hundred  pounds  to  the  farmer  of  Iowa.  It  means  in  the  aggregate  millions 
of  dollars.  How  could  you  apply  that  remedy?  Whose  injury?  Is  it  the 
farmer  who  raises  that  wheat  or  is  it  the  mechanic  who  eats  it?  Who  is  to  bring 
the  suit?  Clearly,  the  man  who  brings  the  suit  must  be  the  one  who  pays  the 
freight,  and  the  man  who  pays  the  freight  has  not  been  injured.  He  is  the 
middleman,  who  buys  and  sells  on  the  rate,  whatever  it  may  be,  and  it  doesn't 
make  the  slightest  difference  to  him  what  that  rate  may  be  if  it  is  nondiscrim- 
inating. 

"No,  there  is  one  remedy — a  just  remedy,  a  remedy  approved  by  the  court 
— and  that  is  this:    If  the  rate  is  wrong,  make  that  rate  right. 

"And  the  question  now  arises,  How  can  you  apply  that  remedy? 
•\\M1.  tli.    courts  have  passed  upon  that,  and  what  the  court  says  is  this— 
and  it   is  a  matter  of  great  importance  that  you  should  understand  it  and  keep 
it    in  mind  in   passing  in  your  own  minds  on   the  legislation  that   is  now  bet  ore 
tin    country  : 

"'The  function  of  prescribing  a  rate  for  the  future  is  a  legislative  and  not 
a  judicial  function.  It  must  be  exercised  either  by  direct  enactment  of  the 
legislature,  or  by  some  commission  created  by  the  legislature  for  that  purpose.' 
You  will  all  see  that  it  would  he  impracticable  for  Congress  to  inquire  into  the 
remedy.     The  only  practical  means  is  by  the  creation  of  a  commission  which 

shall  inquire  into  the  reasonableness  of  the  rate,  and  which,  if  it  finds  the  rate 
Unreasonable,  shall  put  in  its  place  a  rati-  that   is  reasonable. 

"NOW,  that  is  exactly  the  remedy  the  President  proposes.  II.'  takes  the 
Commission    which   exists,   he   savs   that    commission    shall    he   given    power   iii   cas,' 

of  complaini  to  determine  whether  the  rate  in  effect  is  reasonable.  It  not  to 
determine  what  rate  would  he  reasonable  and  to  order  the  carrier  to  observe  thai 
rate  for  the  future,  with  the  proper  right  of  appeal. 

"Now,  what  i>  the  objection  to  that  remedy?  The  first  is  ih.if  you  thereby 
take  out  of  the  hands  of  the  railroad  company  the  right  to  manage  its  own 
business-    that  you  arc  naming  pries. 

"Now,    I    don't    believe   the    legislature   can    name    the   price   of        commodity, 


[gO  DANGER    IS    RAILWAY   MONOPOLY. 

and  1  want  von  distinctly  to  observe  thai  when  the  legislature  or  when  the  com- 
mission names  a  railroad  rate  it  does  not  name  the  prices  of  commodity.  It 
simply  compels  the  railroad  company  to  carry  out  the  contract  by  specific  per- 
formance in  which  it  has  entered  with  the  public. 

"When  the  government  gives  me  the  right  as  a  railroad  corporation  to  take 
your  land  against  your  will,  to  create  a  monopoly  which  you  must  patronize, 
it  Lets  in.  do  that  on  this  condition— a  good  condition— that  I  shall  render  you 
the  service  of  transportation  for  a  reasonable  rate. 

"The  Supreme  Court  of  the  United  States  has  said  that  is  the  implied  con- 
dition on  which  every  railroad  charter  is  granted.  Now,  if  you  and  I  can't 
agree  about  the  price  of  your  land  when  I  take  it,  what  is  done?  Why,  we 
have  that  to  a  disinterested  tribunal,  don't  we?  The  railroad  rate  is  not  a  com- 
modity which  is  bought  and  sold.  It  is  a  public  service  which  is  rendered  by 
a  public  m  rvant,  and  the  public  may  in  self-defense  compel  the  railroad  to  carry 
out  Hie  contract  into  which  it  entered  when  it  obtained  this  charter  to  build  its 
railroad. 

••'l'h.  y  t.  11  you  in  the  next  place  that  there  isn't  any  need  of  any  law.  They 
sai  these  nun  who  manage  our  railroads  all  are  public  spirited  Christian  gentle- 
men. They  won't  impose  on  people  in  any  extravagant  rate.  A  man  said  to 
me  the  other  day:  'Do  you  suppose  a  man  like  Marvin  Hughitt  would  extort 
or  oppress?'  And  I  said:  'No,  sir,  I  don't.  From  all  I  know  of  him  I  don't 
think  there  is  a  man  who  would  be  less  likely  to  extort,  or  oppress  than  Marvin 
Hughitt.' 

"Isn't  John  1).  Rockefeller  a  good  man?  Do  you  know  of  any  sheriff  that 
i-  looking  for  him  under  an  indictment  for  any  offense?  Doesn't  he  lead  a  class 
in  th.-  Sunday  school?  Doesn't  his  heart  warm  to  the  heathen;  just  now  espe- 
cially ? 

•  I~  all  that  any  reason  why  yon  should  not  pass  laws  if  you  can  devise  them 
which  will  prevent  tin  exacting  of  the  monopoly  which  he  invented  and  has 
perpetuan  d  ? 

"Tli-  n  they  tell  you  this  attempt  to  fix  a  railway  rate  is  paternalism.      So  far 

I  can  understand  it.  paternalism,  .as  applied  to  this  thing,  means  any  sort  of 
legislation  which  i-  intended  to  prevent  a  monopolist  from  stealing  all  there  is 
and  keeping  all  he  can  steal. 

"What  i-  the  function  of  a  government?  I  say  the  function  of  a  govern- 
ment  i^  to  give  evi  r\    man  a  fair  chance.      So  long  as  my  brother,  if  he  owns 

railroads  in  this  country,  can  impose  on  me  whatever  rate  he  sees  fit,  there 
3  no  such  thing  as  a  fair  chance.     The  freight  rate  is  the  life  blood  of  com- 


DANGER  IN  RAILWAY  MONOPOLY.  181 

mercial  activity,  and  this  government  has  no  higher  function  than  to  remove 
every  taint  from  that  vital  fluid. 

"Then,  they  say,  this  plan  won't  work  because  of  the  incompetency  of  the 
Interstate  Commerce  Commission.  Now,  if  by  that  you  mean  that  the  present 
members  of  the  Interstate  Commerce  Commission  are  incompetent  I  admit  it. 
And  the  President  has  said  he  is  going  to  remove  them  and  put  somebody  in 
their  place  who  is  competent,  when  we  have  the  new  law.  If  you  mean  it  is 
impossible  to  select  five  men  or  seven  men  who  can  understand  the  question  I 
deny  it.  It  is  to  me  an  absurdity  that  such  a  board  of  men  should  not  be  able 
to  understand  and  intelligently  decide  the  questions  which  come  before  it. 

•'There  is  just  one  other  idea  and  I  am  done.  I  expect  railroad  net  receipts 
are  going  to  fall  off  this  year.  Gross  receipts  are  increasing,  but  there  is  one 
item  of  operating  expenses  which  is  unusually  large,  and  that  is  the  item  known 
as  legislative  expenses.      They  are  heavy  this  year. 

"The  railroads  are  sending  out  to  all  parts  of  this  country  tons  of  literature 
— tables  showing  the  amount  of  the  holdings  of  savings  banks,  trust  companies, 
insurance  companies,  and  such  like  in  railroad  securities.  Now,  what  does  that 
mean?  It  means  that  if  the  Interstate  Commerce  Commission  had  the  power 
to  fi\  a  raic  it  would  make  that  rate  so  low  as  to  impair  the  value  of  those  secur- 
ities.  Hut  so  long  as  the  constitution  of  the  United  States  stands  and  the 
Supreme  Court  does  it >  duty  it  is  not  possible  for  the  commission  or  for  Congress 
to  reduce  rates  to  a  point  which  will  impair  the  value  of  those  securities. 

"There  coin.-,  a  time  when  talk  will  not  suffice.  It  will  be  necessary  to  do 
something.  I  think  that  lime  has  conic.  Kansas  has  spoken.  Minnesota  has 
spoken.      Chicago  has  spoken.      If  you  want  that  sorl  of  talk  to  continue,  just 

Continue  treating  the  trusts  and  monopolies  as  they  have  been  treated  lor  the 
last     l<ii     years.       The    lime    has    come    when    this    country    must    choose    between 

regulal  ion  and  socialism/' 


EDWARD      H.      HARRIMAN, 
The    Noted     Railway    Magnate. 


JAMES    J.    HILL, 

The    western    Railroad    and    Steamship    Mag- 
nate. 


WILLIAM    H.     MOORE, 


The     master     ml  group     of     railway 


A.    J.    CASSATT. 

President     Pennsylvania     Railroad. 


CHAPTER    XIII 
RAILWAY  ABUSES  LAID  BARE. 

The  Railroad  is  a  Carrier,  not  a  Product! — Discrimination  against  Certain 
Localities — Secret  Cipher-code  of  Private  Car  Lines — People  Prefer  Less 
Prosperity  to  Loss  of  Liberty. 

During  the  investigation  of  the  Interstate  Commerce  Commission  and  the 
Senate  special  committee  to  ascertain  the  best  methods  to  approach  the  ques- 
tion of  government  regulation  of  railway  rates  according  to  President  Roose- 
velt's program,  many  serious  abuses  were  laid  hare.  Charges  had  been  made 
repeatedly  and  proved  that  there  was  a  class  of  shippers  that  used  the  rail- 
roads who  were  given  better  rates  than  those  published  as  the  legal  tariff. 
This  rebate  system  thrived  under  several  guises.  The  private  car  lines,  con- 
trolled almost  exclusively  by  members  of  the  Beef  Trust,  gouged  the  small 
shipper  by  means  of  exorbitant  icing  charges,  while  carrying  dairy  products 
for  the  trust  itself  at  no  excess  charge.  Other  trusts,  such  as  the  Harvesting 
Trust  and  the  Steel  Trust,  controlled  small  railways  a  mile  or  two  long,  and 
h\  originating  freight  at  their  plants  and  delivering  it  over  these  little  roads 
to  the   regular   railways   they   got   the  equivalent   of  heavy    rebates.   This   worked 

hardships   to  any   one  who  wanted   to  compete  with  the  trusts.        Still  other 
charges  againsl  the  railways  were  made  to  the  effect  that  the  roads,  by  grant 
in/4'  such  special  privileges  to  the  big  industries,  caused  great  plants  to  cluster 
about    the  principal  shipping  points,  building  up  thickly  congested   cities  where 
poor  people  congregated  in  misery.     On  the  other  hand  the  result  of  this  system 

apparently   was  the  wrecking  of  many  a  small  community  by  the  removal  of 

shops,    mills,    factories,    etc. 

That  the  abuses  existed  was  admitted  before  the  senate  committee  by  none 
other  than  President  A.  B.  Stickney  of  the  Chicago  Great  Western  Railway. 
Charges  againsl   the  Atchison,  Topeka  and  Santa  Fe  for  having  given  rebates 

to  the  Colorado   Fuel   and    Iron   company    caused   something  of  a    scandal    in   both 

business  and  government  circles  because  Paul  .Morton,  Secretary  of  the  Navy 
under  President  Roosevelt  and  Bpecial  adviser  to  the  President  on  railway 
reform,  had  been  acting  vice  president  of  the  Atchison  at  the  time  the  rebates 

188 


184 


R  lll.U AY  ABUSES  LAID  BARE. 


were  said  to  have  been  given.  Great  pressure  was  brought  to  bear  upon  the 
President  to  force  Secretary  Morton  from  oilier  because  of  these  charges,  but 
the  resignation  was  not  asked  i'or  nor  did  it  conic  until  after  the  attacks  on 
the  secretary  quieted  down. 

Even  the  government   itself  was  party  to  such  discrimination  by  accepting 
rebates.      Secretary    of   the    Interior   Hitchcock,   hacked   by   an   opinion   of  the 


GRAIN  ELEVATOR  ON  THE  CHICAGO  RIVER. 

■      thi     mai       i"    ■     grain   elevators   located  on   the  banks  of   the 

rietly   speaking,   ;i    grain  elevator   is  :i    storehouse  for  grain.     It  is  divided 

or  compartments,    the   grain    being    hoisted    into   them   from   cars    or 

ships,   in   buckets    working  on   endless   chains,    the  same  method   being  followed 

-■   cars   oi 


i    department,  on   behalf  of  the  geological   survey  made  arrangements  with 

nber  of  tin    railways  tapping  the  arid  and  semi-arid  regions  of  the  West 

t<>  grant  special  rates  upon  shipments  made  by  contracts  engaged  in  irrigation 

work.     There  was  no  secret  about   the  matter,  hut   complaint   was  made  by  the 

comptroller  of  treasury  in  the  effort  to  keep  the  law.     The  matter  was  referred 


RAILWAY  ABUSES  LAID  BAKE.  185 

to  the  Attorney  General  of  the  United  States,  who  decided  that  the  govern- 
ment was  exempt. 

In  discussing  the  evident  violation  of  the  spirit  of  the  law  if  not  the  law 
itself  President  Stickney  of  the  Chicago  Great  Western  Railway  said  before 
the  Senate  committee: 

"Since  the  injunctions  the  traffic  directors  have  stopped  paying  rebates  on 
grain  shipments,  but  in  lieu  thereof  have  paid  elevator  fees,  a  practice  which 
the  interstate  commerce  commission  has  sanctioned  as  admissible  under  the  law, 
notwithstanding  it  is  evidently  a  rebate  paid  to  elevator  owners  which  is  not 
available  to  ordinary  shippers.  The  traffic  directors  have  made  secret  con- 
tracts with  the  traffic  directors  of  large  shippers  at  rates  below  the  schedule 
rates  and,  having  thus  secured  the  tonnage  in  advance,  they  "publish'  a 
schedule  containing  the  contract  rates. 

'•Such  schedules  are  called  'midnight  schedules'  and  have  all  the  effects  of 
secrel  rebates.  The  small  dealers  are  driven  out  of  the  market  or  the  small 
dealers  who  have  made  contracts  are  saddled  with  losses  which  the  large  dealer 
pockets  as  profits,  and  the  railway  company  secures  a  large  tonnage  of  com- 
petitive traffic. 

"These  legal  midnight  schedules  can  be  prevented  only  by  conferring  on  a 
government  commission  the  sole  power  to  make  such  schedules." 

Other  railway  men,  among  them  Victor  Morawetz,  general  counsel  and 
chairman  of  the  executive  committee  of  the  board  of  directors  of  the  Atchison, 
Topeka  and  Santa  Fe,  admitted  the  law  is  broken  constantly  by  the  railways. 
Mr.  Morawetz  said  thai  chaos  would  ensue  if  they  did  not  ignore  legal  restric- 
tion-. The  complaints  of  discrimination  against  the  merchants  of  small  cities 
Were  frequent.  Hut  complaints  likewise  were  made  by  merchants  of  certain 
static  againsl  the  roads  thai  favored  cities  of  other  states.  A  table  prepared 
to  show  the  discrimination  between  Chicago  and  Illinois  towns  and  Indianapolis 
and  Illinoi  towns,  with  the  rate  charge  by  the  Chicago  and  Alton  on  first  class 
freight,   follows: 

Tariff, 
Miles,  cents. 

Indianapolis     to      Hraceville 1  f|5       ;J"| 

Chicago    to     Hraceville (J"|        ;}o 

Indianapolis     to    Strealor 1  ()()       ;',<> 

Chicago      to      Strealor <)  }.        I}.") 

Indianapolis    to    Peoria 'ill      :5l 

(  hicago  to  Peoria 1 .50      \o 

The    Chicago    and    Alton,    in    other    words,    charges    Chicago    shippers    more 


186  RAILWAY  ABUSES  LAID  lit  HE. 

money  ti>  >liip  their  goods  150  miles  to  Peoria  than  it  charges  an  Indianapolis 
merchant  to  ship  them  211  miles  to  the  same  town. 

Another  tabic  illustrates  the  rates  charged  by  the  Illinois  Central: 

Tariff, 
Miles,  cents. 

Indianapolis  to  Champaign 118     #1 

Chicago    to    Champaign 127     43 

Indianapolis    to    Bloomington 166     31 

Chicago  to  Bloomington 126     43 

[ndianapolis    to    Litchfield 207     37 

Chicago    to    Litchfield 235     47 

The  railways  reply  to  these  charges  of  discrimination  by  saying  that  com- 
petition rules  business  and  that  they  must  foster  the  interests  of  the  territory 
through  which  they  run  in  order  to  build  up  business.  They  say  that  the 
density  of  the  traffic  and  other  conditions  peculiar  to  railway  business  operate 
to  make  it  necessary  to  govern  rates  according  to  the  policy  which  will  work 
for  profits  to  shareholders  in  the  railroad  companies.  For  instance  James  J. 
Hill,  president  of  the  great  Northern  Securities  Merger  company  in  the  North- 
west, told  President  Roosevelt  that  he  had  such  good  business  along  the  line 
of  the  Great  Northern  Railway  that  he  could  lower  freight  rates  25  per  cent. 
and  >till  pay  7  per  cent,  on  his  stock,  whereas  his  competitors  further  south 
would  go  bankrupt  if  the  government  insisted  upon  rates  as  low  as  he  planned. 
Mr.  Hill  pointed  out  also  that  the  line  of  least  resistance  for  export  freight 
business  to  Europe  was  by  way  of  the  Gulf  of  Mexico  in  the  winter  and  by 
Montreal  in  the  summer.  This  made  it  necessary  to  grant  concession  to  shippers 
who  would  use  trunk-line  shipping  by  way  of  New  York  harbor.  It  was  an 
open  fact  that  freight  could  be  sent  through  New  York  if  it  was  to  be  exported 
at  less  cost  than  if  it  was  put  down  at  New  York  to  stay  in  the  country.  The 
cheap  r  rate  was  granted  to  shippers  in  order  to  get  business  which  otherwise 
would  be  lust  altogether  by  the  road  if  it  did  not  offer  cut  rates. 

One  of  the  champions  of  the  people's  side  of  the  question  was  Governor 
La  Follette,  the  man  who  successfully  fought  political  graft  in  Wisconsin  and 
who  had  a  law  enacted  in  thai  state  prohibiting  discriminating  rates  and  pro- 
viding for  government  supervision  of  rates.  Governor  La  Follette,  who  later 
United  States  Senator  from  Wisconsin,  in  arguing  the  rate  question 
in  the  Saturday  Evening  Post  said: 

"No  power  other  than  the  government  itself  is  equal  to  that  of  the  indus- 
trial combinations  which  are  always  in  close  associatioji  and  often  indentified  in 


RAILWAY  ABUSES  LAID  BARE.  187 

interest  with  railroad  and  transportation  companies.  Their  tremendous  politi- 
cal influence  is  shown  by  the  mere  recital  of  the  history  of  the  interstate  com- 
merce act,  and  by  an  examination  of  the  records  of  Congress  for  the  last  seven 
years.  Which  has  had  the  stronger  hold  upon  state  and  national  legislation 
during  the  last  twenty  years,  the  corporations  or  the  people?  Whose  interests 
have  been  the  more  safely  guarded?  Where  is  the  power  lodged  which  has  for 
seven  years  been  strong  enough  to  bar  national  legislation  designed  to  enlarge 
the  powers  of  the  interstate  commerce  commission?  It  is  not  necessary  to 
charge  venality  anywhere,  but  that  the  public  service  corporations  have  been 
steadily  undermining  representative  government  in  national,  state  and  municipal 
legislation,  no  thoughtful  man  can  question.  They  come  between  the  people 
and  the  chosen  representatives  of  the  people. 

"I  would  in  nowise  disparage  either  the  rights  or  the  interests  of  the  rail- 
road side  of  this  legislation.  The  question  is  one  of  very  greal  magnitude. 
The  amount  of  property  involved  is  very  large.  The  owners  of  railroads,  and 
the  holders  of  railroad  securities  must  be  protected  in  all  their  rights.  They 
must  not  be  wronged  in  any  way.  They  are  entitled  to  such  remuneration  as 
will  enable  them  to  maintain  their  roads  in  perfect  condition,  pay  the  best 
of  wages  to  emplo3'cs,  meet  all  other  expenses  incident  to  operation,  and  in  addi- 
tion thereto  enough  more  to  make  a  reasonable  profit  upon  every  dollar  invested 
in  the  business.  To  preserve  all  of  these  rights,  they  are  entitled  to  the  strong- 
esl    protection   which  the  law  can  afford. 

•"Hut  tin  public,  each  community  and  every  individual,  has  rights  equally 
precious.  Upon  the  railway  companies  rendering  an  adequate  and  impartial 
service  at  reasonable  rates  all  general  prosperity  is  dependent.  Deprived  of 
these,  every  community  is  checked  and  limited  in  its  growth:  every  business  of 

whatever  nature   must    languish   and    fail.      Tin    denial   of  an    impartial   service  at 

reasonable  rate-   is  the  denial  of  equal  opportunity,  the  denial  of  a  "square 
deal." 

"In  the  long  struggle  to  secure  legislation,  the  friends  (.f  the  measure  have 

been   content    to  ask    little,  and   they   have   received   nothing.      Hut    through  all  of 
the  years  of  waiting  and  disappointment,  of  ruin   to  individuals  and  demorali/a 

tion  to  the  business  of  many  communities,  public  sentiment  has  been  gathering 
Force.     It   is  all  powerful  nrhen  once  aroused.     Unless  I  mistake  the  temper  of 

the   American   people,  they   will  demand   the   full   measure  of  their  rights.      They 
uill  not   halt  or  stop  or  compromise  until  that  demand  is  fully  satisfied. 

"The   abuse   of   the    rat.'  making   power   lie.    .,|    f  he    foundation   of   the   trans 

portation  problem.     Through  this  the  traffic  can  be  controlled  and  centralized 


188  RAILWAY   ABUSES  LAID  BARE. 

at  railway  terminals,  business  consolidated,  and  combinations  established. 
Remedial  legislation  therefore,  to  be  effective,  must  strike  at  the  root  of  the 
evil.  It  must  place  the  rate-making  power  where  i1  will  be  used  fairly  and 
justli  to  all  concerned.  The  public  has  Long  permitted  itself  to  be  treated  as 
though  its  interests  were  of  small  consideration.  The  miner,  the  manufac- 
turer, the  farmer,  turn  out  the  products  which  constitute  the  traffic  of  the 
country.  They,  and  the  consumers,  are  vitally  interested  in  everything  pertain- 
ing to  the  transportation  of  those  products.  The  railroad  corporation  is 
chartered  through  the  favor  of  the  state  to  engage  in  the  transportation  busi- 
aess,  nothing  else.  It  was  created,  and  given  its  special  powers  and  privileges, 
to    promote    tin     general    prosperity    of    all. 

"It  has  not  been  vested  with  authority  to  decree  that  one  shipper  or  city 
shall  grow  rich  and  grea!  at  the  expense  of*  another.  It  is  presposterous  that 
the  corporation,  which  is  merely  a  carrier,  not  the  producer  or  consumer  of  the 
product  carried,  should  be  permitted  to  stand  in  such  a  relation  to  that  product 
;h  to  indicate  that  its  interests  are  the  sole  interests  to  be  considered.  The 
carrier  should  not  he  permitted  to  say  where  the  product  shall  he  marketed. 
If  it  has  authority  to  dictate  rates  it  can  make  it  impossible  for  the  producer 
to  choose  his  own  market.  It  can  so  arrange  its  schedule  of  rates,  it  can  so 
conduct  its  service,  as  to  force  produce,  merchandise  and  manufactures  to  the 
market   which  it  chooses  to  build  up. 

"The  making  of  the  rate  is  a  matter  of  deep  concern  to  more  than  one 
party  to  a  traffic  transaction.  True,  the  railway  company  has  large  interests 
involved,  but  this  very  fact  unfits  it  to  be  the  sole  judge  in  making  rates. 
Rates  made  by  the  railway  company  are  made  by  a  party  prejudiced  in  its 
own  interests  and,  therefore,  certain  to  be  unjust  to  the  public.  It  is  disquali- 
fied and  should  be  barred.  It  is  entitled  to  be  heard;  all  of  its  interests  must 
be  fully  and  fairly  weighed  in  regulating  its  services  and  fixing  their  value  to 
the  public.  Hut  its  interests  are  not  paramount  to  those  of  the  public.  The 
producer  and  consumer  are  likewise  entitled  to  be  heard  as  well  as  the  railway 
company,  and  it  is  then  the  duty  of  the  government,  standing  between,  to 
determine  impartially,  the  rights  of  the  railway  company  and  the  rights  of 
the  public. 

"In  all  of  the  hearings  before  congressional  committees,  those  opposed  to 
enlarging  the  powers  of  the  interstate  commerce  commission  seem  to  believe 
that  there  is  something  sacred  about  a  railway  rate:  that  it  would  be  a  veritable 
sacrilege  for  any  one  outsidi  of  the  railroad  management  to  lay  a  hand  upon 
a    freight    schedule.      Any    critical    investigation    of    railway    tariffs,    and    the 


RAILWAY  ABUSES  LAID  BARE.  189 

advances  made  in  rates  from  time  to  time,  will  convince  the  student  that  rate- 
making  is  more  frequently  controlled  by  the  financial  management  than  the 
traffic  department  of  the  road.  But  I  am  free  to  admit  that  rate-making 
requires  technical,  expert  knowledge  and  experience.  The  railroads  are  able  to 
secure  the  services  of  nun  fitted  to  make  rates.  Surely,  this  great  government, 
with  all  of  its  wealth  and  power,  with  all  that  it  has  involved  in  protecting  the 
interests  of  the  citizen,  can  employ  equally  competent   men." 

The  complaints  made  against  the  owners  and  operators  of  private  car  lines 
resulted  in  some  good.  In  this  crusade  both  the  railways  and  the  shippers 
joined,  for  both  suffered.  The  railroads  declared  they  did  not  give  shippers 
on  these  private  car  lines  any  rebates,  but  that  they  had  been  forced  to  make 
contracts  with  the  car  companies  for  the  use  of  certain  kinds  of  cars  for  carry- 
ing live  stock,  dressed  meats,  dairy  products,  vegetables  and  other  articles 
requiring  refrigeration  or  similar  service,  paying  a  certain  mileage  therefor. 
As  pointed  out  in  relation  to  the  Beef  Trust,  which  owns  most  of  these  cars, 
the  companies  which  are  thus  paid  for  the  use  of  the  cars  make  their  own 
charges  to  shippers  for  icing,  etc.,  and  vary  these  to  suit  themselves  and  grant 
rebates  to  favored  shippers  as  they  see  fit. 

All  these  charges  practically  have  been  proved  before  the  interstate  coin- 
merce  commission.  For  instance  President  George  U.  Bobbins  of  the  Armour 
car  lines  admitted  that  the  company  had  twenty  or  thirty  exclusive  contracts 
with  railroads  for  fruit  transportation  business  and  acknowledged  a  monopoly 
of  that  traffic  in  parts  of  the  West  and  South.  Wherever  these  contracts 
applied  the  producers  and  shippers  had  to  accept  tin-  rotes  laid  down  by  the 
Armours.  lie  insisted,  however,  that  his  company  was  a  private  one  and  there- 
fore not  Bubjeci  to  the  interstate  commerce  law. 

Il\  its  own  letters,  IK  -cent  cipher  code,  and  other  documentary  evidence, 
the  Armour  Car  Line  company  was  shown  before  the  interstate  commerce  com- 
mission to  have  paid  rebates  on  fruit  shipments  from  California,  of  discrimi- 
nating between  shippers  in  the  amount  of  rebates,  of  charging  for  refrigeration 

that  is  not  furnished,  and  of  accepting  payment  from  the  Chicago  &  North- 
western. Chicago,  Milwaukee  &  St.  Paul,  and  Grand  Trunk  railroads  for  rout- 
ing   fruit    traffic    in    Armour   cars   over   those    railroads. 

If.   .1.   Streyckmans,   now    a   stenographer   in   a   Chicago  hotel,  and   who,   from 

April.  1900,  till  July,  190k  was  confidential  clerk  for  W.  G.  Seeley,  superin- 
tendent of  the  Armour  ear  lines,  furnished  the  evidence  to  the  commission, 
having  copies  of  letters  of  the  company  showing  its  relations  to  shippers  and 
railroads. 


li)0 


RAILWAY   ABUSES  LAID  BARE. 


The  attorney  for  the  Armour  company  denounced  Streyckmans  as  a  thiol 
and  a  traitor,  but  did  not  challenge  his  evidence  against  the  company.  When 
Streyckmans  produced  a  copy  of  the  secret  cipher  code  of  the  Armour  com- 
pany, its  attorneys  fought  with  all  their  mighi  to  keep  it  from  being  retained 
by  the  interstate  commerce  commission,  but  failed.  The  code  was  a  printed 
hook  oi'  about  400  pages. 

Souk   of  the  cipher  words  and  their  meaning  were: 

Laughsome — Rebate. 

Launch — Bitter   arrange    rebate   there. 

Launched — Burning  stock  at  both  ends. 

Launching — Can  make  rebate. 

Laundry — Force  payment  of  higher  rebate. 

Laurus — Pay    rebates. 

Lava-    Rebates  must  be  confidential. 

Lavishment — Working    for   rebate   on — 

Kinsley — Shade  rates  a  little  rather  than  lose  the  business. 

Apelles — What  allowance  is  necessary  to  secure  the  business. 

Jocularis — Divide  rate. 

Jewelry — Rates  being  secretly  cut  by  all  lines. 

Judiciary — Keep   your  rates  below  all  others. 

Junior — Rates   must   be   made   which   will   secure   the   business. 

Junk — If  necessary  to  secure  business  you  can  make rate  to 

Juvenal — Maintain  rate  unless  


Kaeinester — Manipulate    rates    so   as   to   

Kland — Meet  rate  by  voucher. 

Kalatna — Meet   any   rate   offered. 

footpath — Interstate   commerce   commission. 

Footprint — Avoid  service  of  summons  from  interstate  commerce  commission. 

hoot  rot — Meeting  of   interstate  commerce  commission  at  on  to 

consider  question  of  

Imprint — Martin   A.   Knap}),  chairman. 

Imprinted — Judson   C.   Clements. 

Imprinting — J.    I).    Yeomans. 

Imprison — Charles  A.  Prouty. 

Improhitas — Joseph  W.  Fifer. 

Improbity — F.  A.  Moseley. 

Armour — Arrange  this  with  the  utmost  secrecy. 

"The  Northwestern  railroad  billed  ice  to  the  Armour  company  for  $1  per 


RAILWAY  ABUSES  LAID  BARE.  191 

ton,"  said  Streyckmans.  "On  that  ice  the  Armour  company  makes  from  500 
lo  600  per  cent,  profit.  The  Chicago,  Milwaukee  &  St.  Paul  railroad  pre- 
sented bills  for  $2.50  per  ton,  but  accepted  a  counter  claim  of  $1  per  ton  from 
the  Armour  company,  making  the  net  cost  $1.50  per  ton.  The  Erie  railroad, 
at  Gallon,  Ohio,  charged  $1.25  or  $1.50  per  ton.  At  Fort  Worth,  Texas,  the 
parties  furnishing  ice  charged  $3.50  per  ton,  but  the  Texas  &  Pacific  railroad 
remitted  to  the  Armour  company  $1  per  ton,  making  the  price  $2.50  per  ton." 

"While  you  were  with  the  Armour  company,  did  it  pay  rebates  on  icing 
charges  to  fruit  shippers?"  asked  the  commission's  attorney. 

"Yes,"  answered  Streyckmans. 

'"Did  it  pay  the  same  rebates  to  all  shippers,  without  discrimination?" 

"No,"  answered  the  witness.  "To  certain  shippers  on  what  was  known  as 
the  'form  141  list,'  the  highest  rebates  were  paid.  Another  printed  form,  or 
blank,  was  used  for  making  icing  bills  to  other  shippers  and  they  received 
smaller  rebates. 

"Among  the  California  shippers  who  received  "allowance  statements/  or 
rebates,  on  form  141,  were  Frank  H.  Buck,  the  Pioneer  Fruit  company  (or- 
ganized by  the  Armour  company  to  compete  with  the  Santa  Fe),  Porter  Bros, 
of  Chicago,  the  Producers'1  Fruit  company  of  Sacramento,  and  former  Lieu- 
tenant  Governor  Anderson  of  California. 

"All  shippers  on  the  '141  list'  paid  only  the  actual  cost  of  icing  cars  and 
a  car  rental  of  $10  to  Chicago  and  $15  to  New  York.  The  tariff  from  Sacra- 
mento to  Boston  was  $120.  The  icing  cost  $88  or  $39,  the  car  rental  $20, 
making  a  total  of  $58  or  $59,  and  these  shippers  received  rebates  of  $61  or 
!   a   car. 

"Among  other  shippers  not  on  the  "111  list,'  who  received  smaller  rebates, 
were  Stevens  &  Humphrey,  S.  I.  Roper,  Schnabel  Bros.,  George  1).  Kellogg, 
and  Pinkham  &  McKevitt,  all  of  Sacramento." 

The  result  of  this  investigation,  aside  from  government  action,  was  a 
speedy  concession  to  Michigan  fruit  growers  who  helped  to  fighl  the  private 
ear  combination.  Secret  meetings  wire  held  by  the  trust  officials  ami  the 
Armour   line   reduced    its  carrying  and    icing  charges   15  to  30   per  cent. 

Of  the  many  problems  brought  up  by  the  railway  abuses  for  solution  those 
of  the  rebate,  private  car  abuses  and  discrimination  againsl  localities  seem  to 
have  called  forth  the  greatest  complaints  from  the  public.  As  regards  the 
solution  of  the  whole  matter,  according  to  the  judgment  <•('  the  Wall  Streel 
Journal,  there  are  just   four  ways  open. 

"The  first    way,"   lays  thai   authority,  "is  thai   of   free  competition,  unre- 


igg  RAILWAY  ABUSES  LAID  BARE. 

stricted  and  unregulated  in  any  way.  That  such  competition  would  operate  to 
the  advantage  of  shippers  there  can  be  no  doubt.  Hut  it  would  make  railroad 
rates  unstable;  it  would  make  the  operation  of  the  railroads  at  a  profit  difficult, 
it'  not  impossible;  and  as  the  prosperity  of  the  railroads  and  the  stability  of 
rates  are  essential  to  the  prosperity  of  the  whole  country,  unrestricted  competi- 
tion between  transportation  companies  might  he  calamitous.  There  was  a 
notable  development  o\'  the  country  during  the  period  when  railroad  competi- 
tion was  most  extensive,  hut  that  period  was  filled  with  many  intervals  of 
depression,  due  largely  to  the  instability  of  rates.  It  is  noteworthy  that  the 
greatest  prosperity  this  country  has  enjoyed  lias  been  during  the  time  when 
railroad  consolidations  have  materially   reduced  the  area  of  competition. 

"Another  way  is  that  of  complete  monopoly.  At  the  outset  it  may  he  said 
that  while  the  period  of  greatest  prosperity  in  this  country  has  been  coincident 
uith  a  reduction  in  competition,  it  has  also  been  just  that  period  in  which  the 
most  vigorous  measures  have  been  taken  to  prevent  complete  monopoly.  What- 
ever may  be  the  advantages  of  a  consolidation  of  the  ownership  and  control  of 
the  railroads  in  the  hands  of  a  few  strong  men,  this  much  may  be  said  with 
certainty,  that  the  people  of  the  United  States  will  never  permit  for  long  the 
railroads  of  the  country  to  be  completely  monopolized.  They  would  prefer 
even  less  prosperity  to  the  loss  of  liberty. 

"The  third  way  is  that  of  Socialism — that,  is  to  say,  government  ownership 
of  the  railroads.  There  has  been  some  growth  of  public  sentiment  in  the 
United  States  in  favor  of  such  a  development;  but  the  administration  of  the 
po>t  office,  which  is  government  business,  has  not  been  such  as  to  make  the  idea 
of  government  ownership  of  the  railroads  attractive,  even  if  the  people  were 
prepared  for  any  such  advance  toward  Socialism. 

•'The  fourth  way  is  that  of  government  regulation,  which  is  the  middle 
road  between  Socialism  on  the  one  hand  and  complete  competition  on  the  other. 
The  only  alternative  for  either  government  ownership  or  the  wastes  of  unregu- 
lated competition  is  government  supervision.  There  is  no  other  stopping  place. 
We  musi  either  enforce  competition  to  the  fullest  extent  or  else  the  government 
must  buy  the  railroads  and  operate  them.  If  we  fear  the  consequences  of 
unrestricted  competition,  the  power  of  complete  monopoly  or  the  results  of 
government  ownership,  then  we  must  be  prepared  to  accept  that  policy  which, 
while  leaving  the  railroads  to  the  operation  of  private  capital,  shall  permit 
them  to  secure  that  measure  of  concentration  which  is  essential  to  the  largest 
economical  results  and  stability  of  rates,  and  then  subject  them  to  vigorous 
government   regulation." 


CHAPTER   XIV 

THE  WORLD'S  GREATEST  INDUSTRY. 

The  Combined  Length  of  the  Railways  of  the  United  State*  Amounts  to  About 
Two-fifths  of  the  Total  Mileage  of  the  World  -Great  Advancement  in 
Railway  Construction,  Train  Equipment,  High  Speed  and  Safety  Devices 
— Railroad  Building  the  Foundation  of  Commercial  and  Industrial  Progress 

and  Prosperity. 

Measured  by  the  volume  of  capital  invested  in  it,  by  the  number  of  men 
employed  directly  and  indirectly  by  it,  and  by  the  importance  of  its  influence 
on  every  phase  of  commerce  and  life  in  the  world,  the  railway  may  be  fairly 
termed  the  greatest  of  the  world's  industries.  From  the  earliest  time  to  the 
present,  students  of  public  affairs  have  realized  that  the  control  of  transporta- 
tion systems,  be  they  primitive  or  highly  organized,  was  synonymous  with  the 
control  of  commerce,  and  therefore  of  almost  every  material  interest.  The 
Romans  wen-  great  road-builders,  and  they  exploited  the  world  for  their  profit. 
Napoleon  was  a  road-builder,  and  gained  much  of  his  strength  bv  virtue  of  his 
roads.  The  Russians  have  been  road-builders,  across  Siberia,  over  the  Cau- 
casus, and  into  Central  Asia.  It  they  had  used  their  roads  for  commerce  and 
peaceful  development,  rather  than  for  political  and  military  conquest,  tlu\ 
would  be  bet  ter  off  today. 

In  the  last  Century  Americans  have  been  the  greatest  of  road  builders,  and 
with  the  development  of  the  railway  they  have  taken  advantage  of  ils  possibili- 
ties to  create  highways  throughout  the  length  ami  breadth  of  their  land.  Wc 
have  seen  how  the  developmenl  of  railway  systems  ami  the  manipulation  of  their 
financial  and  operating  control  has  made  millionaires  and  has  made  those  mil- 
lionaires magnates.  Lei  us  mm  glance  it  the  material  side  of  the  industn  to 
observe  some  of  the  picturesqu<  fads  in  the  construction  and  operation  of  rail 
way  Inns  in  actual  service. 

'I  he  combined  length  of  the  railways  of  the  United  SImIcs  amounts  to  over 
two  hundred  thousand  miles,  and  of  the  whole  world  t"  approximately  five  hun 
dred  thousand  miles.  The  increase  is.a1  the  pate  of  about  ten  thousand  miles  a 
year  the  world  over.  The  most  able  financial  organizations,  the  most  skillful 
executives,  and  the  most  ingenious  inventors  are  devoting 'their  attention  t<>  the 
details  of  the  railway  .^  an  industry.     Constant   improvement   is  recognized  as 

198 


IJH 


THE    WORLD'S   GREATEST   INDUSTRY. 


an  essential  to  success.  OKI  roads  are  reconstructing  their  lines,  and  new  ones 
are  built  with  the  utmost  care  to  assure  the  permanency  of  their  tracks,  the 
economy  of  their  administration  and  the  comfort  of  their  travelers.  Heavy 
steel  rails  have  supplanted  the  light  ones  of  iron;  rock  ballast,  is  used  where  earth 
formerly  sufficed;  steel  bridges  span  the  streams  and  the  old  wooden  culverts 
are  burned  at  the  roadside;  curves  are  straightened;  grades  are  reduced;  tun- 
nels penetrate  the  mountains  where  trains  formerly  reached  the  summits  by 
slow  climbing.  All  this  contributes  to  the  safety,  ease  and  speed  of  the  journey, 
but  it  likewise  reduces  the  cost  of  maintenance  and  operation,  so  that  the  rail- 
way companies  find  direct  as  well  as  indirect  profit  from  their  increasing  expend- 
itures. The  elevation  of  tracks  through  cities,  thus  eliminating  grade  cross- 
ings, and  the  perfection  of  various 
block  signals  and  safety  switch  sys- 
tems, help  to  give  additional  safety  to 
traffic  and  make  high  speed  possible. 
Train  equipment  has  improved 
with  the  increase  in  travel,  and  today 
the  railway  journey  offers  comforts 
and  luxuries  at  a  moderate  price  which 
are  hardly  to  be  found  in  any  but  the 
homes  of  the  wealthy.  A  modern 
transcontinental  train  is,  in  fact,  a 
luxurious  home,  with  all  the  details  of 
a  splendid  club-house  or  hotel  avail- 
able, while  one  races  across  plains  and 
mountains  at  high  speed.  Such  trains, 
equipped  with  palace  sleeping  cars, 
dining  cars,  drawing  room  and  obser- 
vation cars,  a  library,  barber  shop, 
cafe,  card  room,  music  room,  electric- 
lights,  and  vestibules  excluding  the 
noise  and  dust  as  one  passes  from  one 
car  to  another,  with  waiters,  porters, 
and  a  ladies'  maid  ready  to  serve  the  passengers  with  everything  demanded,  add 
enticement  to  tin  prospect  of  a  journey  where  formerly  the  destination  itself  was 
only  reward. 

It   is  not  alone  in  the  United  States  that  railway  construction  is  advancing 
rapidly,  and   luxurious   facilities  for  travel  are  provided.     All  over  the  world 


OBSERVATION    PLATFORM    OP    A 
MODERN   TRAIN. 


THE  WORLD'S  GREATEST  INDUSTRY.  195 

the  same  spirit  of  energy  rules,  and  the  effort  to  connect  remote  lands  by  these 
arteries  of  commerce  never  ceases.  On  our  own  continent  our  neighbors  to 
the  north  and  the  south  are  active.  One  trans-continental  line  crosses  Canada 
from  ocean  to  ocean;  a  second  is  advancing  rapidly  to  completion,  and  a  third 
has  been  chartered  and  financed.  In  addition  to  these  a  railway  to  Hudson's  Bay 
Is  moving  steadily  northward  toward  a  port  on  that  great  inland  sea  which 
connects  with  the  Arctic  Ocean.  In  Alaska,  railway  construction  has  begun, 
and  now  the  gold  hunter  can  reach  the  Klondike  by  connecting  service  of  steam- 
ers and  railway  cars,  without  a  memory  left  of  the  hardships  of  the  trail  or 
Less  than  a  decade  ago.  The  Mexican  Republic  has  witnessed  the  construction 
of  more  than  10,000  miles  of  railway  within  the  last  few  years,  and  the  country 
is  traversed  in  every  direction  by  lines  which  are  being  extended  rapidly.  Since 
Cuba  became  a  Republic  a  syndicate  of  American  ami  Canadian  capitalists  has 
united  the  railway  systems  of  the  island,  so  that  today  the  traveler  may  journey 
from  Havana  to  Santiago  in  a  Pullman  car,  finding  branch  lines  at  his  disposal 
by  which  hi'  may  reach  every  important  port  on  either  coast. 

The  South  American  and  Central  American  Republics  have  joined  with  the 
United  States  in  a  concerted  effort  to  connect  the  two  continents  by  railway 
via  the  Isthmus  of  Panama.  An  international  commission  has  control  of  the 
preliminaries  and  the  intercontinental  survey  has  been  completed.  In  South 
America  the  Andes  range  has  been  a  difficult  obstacle  for  transcontinental  lines 
to  overcome,  hut  already  the  mountains  have  been  penetrated  from  the  Pacific 
coast  by  several  lines,  and  the  railway  from  ocean  to  ocean  is  a  thing  ot  the 
near  future.  The  heart  of  the  continent  is  reached  by  numerous  Lines  in  Argen- 
tine and  Brazil,  lines  which  afford  outlet  for  the  immense  production  of  the 
interior  and  novel  journeys  for  the  inquiring  traveler. 

In  Asia  lh«'  whole  political  and  military  situation  has  been  affected  by  the 
const  ruction   of   the  Trans-Siberian    Railway,  built    by   the   Russian   Government 

Extending  as  it  does  all  the  way  from  the  European  provinces  of  the  Empire, 

across  the  whole  of  Asia,  to  a  terminus  on  the  Pacific  Ocean,  it  offers  a  new  way 
around  the  world,  with  scenes  and  conditions  of  invariable  interest  to  meet  the 
traveler  at  every  turn.     The  entire  length  of  this  wonderful  railway,  from  the 

Ural    Mountains   to  the   Pacific,   is  nearly  double   that    of  an    American   trans  con 

tinental  line,  or  more  than  (;,<><>(>  miles,  and  it  was  constructed  at  a  total  cost, 
including  all  incidental  expenses,  of  over  $400,000,000.  from  a  European 
port  .>.,  the  Atlantic,  Havre,  for  instance,  it  is  therefore  possible  to  go  by  con- 
tinuous connecting  lines  „f  railway,  a  distance  of  nearlj  10,000  miles,  right 
across  the  two  continents  or  almost  half  way  around  the  world.     The  Siberian 


196 


THE  WORLD'S  GREATEST  INDUSTRY 


line  was  not  begun  until  1891,  and  the  completion  of  it  in  eleven  years,  across 
the  Steppes  of  Siberia,  the  greal  rivers  which  flow  through  Asia  into  the  Arctic 

in,  the  mountain  ranges,  and  the  wilderness,  is  the  mosl  ooteworthy  achieve- 
ment in  the  historyof  railway  construction. 

Trans-continental  trains  on  the  Siberian  Railway  are  equipped  as  our  own 
railway-  in  America  are,  with  sleeping  cars  and  dining  cars  of  Russian  patterns. 
In  addition,  they  have  bath-rooms,  a  gymnasium,  and  a  church  car  which 
travels  with  the  train  at  times,  where  priests  hold  services  for  the  benefit  of  the 
faithful  while  they   arc  speeding  through  the  heart    of  Asia. 


SCENE    ON    THE    UNION   ELEVATED    "LOOP,"   CHICAGO. 

The  problem   of  rapid    transit    in    large   cities    Is   apparently   Bolved   by  its  elevated  rail- 

.  with  station-  ntervals.     At  this  point  six  separate  systems  of  trains,  reaching 

parts  of  tli«-  city,  pass  at  the  rate  of  about    one  nam   per  minute  during  the 

morning  and  evening  hours  when  people  are  coming  to  or  an-  returning  from  their  days 

laboi  •  iken   for  the  safety  <•!'  passengers.     There  is  a   complete   modern 

:n  of  interior-king  switches,   which  are  controlled  by  levers  from  the  signal   tower  m  the 

ture. 


CHAPTER    XV 

JUGGLING  WITH  DOLLARS,  OR  HOW  SPECULATION  IS 

CARRIED  OX. 

Speculative  Fever  is  Inborn — Speculation  Means  to  Spy  Out — Before  the 
Advent  of  Instantaneous  Communications  by  Telegraph  and  Telephone, 
Business    Carried    on    Between     Distant    Communities    was    Speculative — 

Modern  Speculation  is  Gambling  on  a  Basis  of  the  Element  of  Time  and 
is  Considered  Injurious  to  the  Morals  and  Interests  of  the  Public — Barom- 
eter of  Business. 

Everybody  at  sonic  time  speculates  in  some  form  <>r  other.       It    is  probable 

there  never  was  a  greal  fort  line  accumulated  without  a  great  deal  of  specu- 
lation. Of  the  thousands  of  millionaires  of  the  country  and. of  the  whole 
world,  those  who  did  not  inherit  their  wealth  doubtless  accumulated  it 
through  Diethods  in  some  degree  speculative,  and  even  those  fortunes  that 
have  been  inherited  very  likely  had  their  foundation  in  this  sort  of  business. 
But  there  are  a  great  many  wrong  conceptions  as  to  what  speculation 
is.  The  word  speculation  comes  from  Latin  origin  and  means  to  spy  out. 
In  its  simplest  form  in  a  business  sense  it  mean-,  to  spy  out  an  opportunity 
to  make  a  profit  through  a  business  transaction.  Today  it  means  the  buy- 
ing and  selling  of  property  with  a  view  to  securing  profits  through  changes  in 
the  price  of  thai  properly.  \<arl\  every  business  transaction  has  some  sort 
of  speculative  elemenl  about  it,  hut  generally  speaking  the  term  is  confined 
to   those   operations   where    the   element    of   risk    is   an    important    one. 

In    the  old   days,   before   the   railway    had   been   developed   so   thai    trans- 
portation   from    place    to    place    WES    easy    and    rapid    and    before    the    telegraph 

and  telephoni  made  communication  instantaneous,  most  business  earned  on 
between  distanl   cities  or  countries  was   largely  speculative.      This  was  due  to 

the     fact     thai     prices    of    an\     commodity     fluctuated     somewhat     widely     in     Hie 

different  markets,  more  widely  than  the  difference  in  transportation  ami  other 
charges  would  warrant.  The  cause  of  this  naturally  was  the  fad  that  mer- 
chants were  not  in  touch  with  market  conditions  as  is  the  Case  today,  and 
hence  were  not   able  to  unit   supply  and  demand   rapidly  enough  to  equalize 

prices. 

I!)7 


J.   OGDEN  ARMOUR, 
President    of    Armour   &   Co. 


CHARLES    M.    SCHWAB, 
First  President  of  the  United  States  Steel  Cor- 
poration. 


JAMBS   A.    PATTEN, 
Noted   Grain    Speculator 


JOHN    W.     GATES, 
Noted    Grain    and    Stock    Speculator. 


JUGGLING   WITH  DOLLARS.  199 

Today  the  great  improvements  in  business  methods  have  revolutionized 
such  business.  Speculative  business,  therefore,  lias  come  to  be  confined  almost 
exclusively  to  transactions  involving  the  element  of  time.  In  its  simplest 
phase  time  speculation  was  nothing  more  than  buying  property  outright  and 
holding  it  in  the  anticipation  of  a  rise  in  price.  This  practice  is  as  old 
as  civilization  and  generally,  until  recently,  has  been  considered  injurious  to 
the  best  interests  of  a  people.  Toward  the  end  of  the  seventeenth  century 
it  was  the  custom  in  Holland  to  buy  and  sell  the  products  of  fishing  voyages 
before  the  results  of  the  voyage  were  known.  A  century  later  speculation  in 
grain,  coffee,  etc.,  was  very  active  in  Amsterdam,  developing  man}'  of  the 
practices  of  modern  exchanges.  In  that  age,  however,  the  buying  and  sell- 
ing was  of  a  particular  lot  of  goods  or  products. 

As  modern  improvements  were  effected  and  many  commodities  were  stored 
in  public  warehouses — such  as  grain  in  the  grain  elevators — the  custom 
arose  of  giving  warrants  or  receipts  for  such  stores.  With  this  development 
it  became  the  custom  to  trade  or  speculate  in  the  warrants  for  a  certain 
quantity  of  any  commodity  of  a  standard  quality  or  grade.  Then  speculation 
received  a  new  impetus.  It  thus  became  possible  for  a  man  to  sell  goods 
which  he  did  not  possess,  for  at  any  time  he  could  secure  identical  goods  upon 
the  market  with  which  to  fill  his  contract  for  delivery  if  he  could  pay  the 
price.  The  marvelous  growth  of  speculation  in  recent  years  is  due  largely 
to  this  principle.  To  this  also  is  due  that  peculiar  kind  of  contract  so 
common  to  speculation  and  against  which  there  has  been  considerable  legis- 
lative hostility  both  in  America  and  in  England — the  contract  for  future 
delivery    generally    termed    trading    in   "futures." 

Fundamentally  speculation  plays  a  great  pari  in  the  actual  business  of 
the  world.  Win  n  the  supply  of  any  commodity  is  liable  to  great  uncer- 
tainties, a>,  for  example  the  products  of  agriculture,  it  is  generally  held  thai 
the  distribution  of  the  commodity  should  be  as  Dearly  equal  to  the  demand  as 
possible  equalizing  the  price  so  that  one  year  there  will  not  be  famine  or 
famine  prices  and  the  next  year  Buch  a  glut  that  the  producer  will  have  t«> 
allow  his  commodity  to  go  to  waste.  A  class  of  people  who  make  a  business 
oi  studying  the  question  of  supply  and  demand,  endeavoring  to  buy  Buch 
commodities  when  they  are  abundant  and  cheap  in  order  t<>  sell  them  when 
the    price    advances     serves    to    bring    aboul    Mich    a    distribution    and    thus 

renders   an    important    social    service.        In    other   lines   of   business,   such    as    iron 

and  steel,  fluctuations  in   price-   frequently  are  very  wide.     The  consumer  in 
order   to   guard   against    loss  often   makes   contracts   with   producers   for  the 


200  JUGGLING  WITH   DOLLARS. 

futun  delivery  of  the  product  at  a  given  price.  This  in  most  quarters  is  not 
considered  other  than  highlv  organized  business.  Bui  nevertheless  it  has  all 
the  elements  of  speculation.  Business  risks  of  this  character,  therefore,  arc 
insured  against  by  what   i-  considered  legitimate  speculation. 

Often,  however,  the  speculator,  through  shortsightedness,  mistakes  condi- 
tions as  they  exist  and  does  not  calculate  closely  enough  as  to  the  future 
supply  ami  demand.  When  such  a  thing  happens  it  is  often  that  the 
speculator  causes  greater  evils  than  those  which  he  is  supposed  to  overcome 
through  his  usual  functions.  Thus  for  a  time  speculation  may  serve  to  keep 
prio-  abnormally  high,  only  to  cause  such  heavy  overproduction  in  a  suc- 
ceeding period  that  prices  may  fall  to  an  exceedingly  low  point.  Specula- 
tion thus  may  bring  about  a  panic  or  crisis,  with  hard  times  and  business 
stagnation  following  after. 

It  may  1»  conceived  readily  enough  that  where,  through  the  risk  of 
capita]  and  the  exertion  of  wisdom  and  experience,  liberal  profits  follow 
speculative  activity,  a  great  many  persons  ignorant  of  business  methods  and 
market  conditions  are  tempted  to  speculate.  Among  people  who  are  bent 
upon  making  profit-  it  also  is  but  natural  to  find  unscrupulous  persons  who 
will  take  advantage  of  such  ignorance  to  spread  false  reports  or  otherwise 
play  upon  the  credulity  of  ill  informed  speculators.  This  often  brings  ruin 
to   individual-  and   in   the  long  run   works  against  the  welfare  of  the   public. 

While  every  business  which  has  in  it  any  sort  of  considerable  risk  is 
strictly  -peaking,  speculation,  this  phase  of  commerce  finds  its  most  highly 
organized  machinery  in  the  boards  of  trade  and  stock  exchanges.  Real  estate 
also  lends  it-elf  readily  to  speculation,  some  of  the  greatest  fortunes  having 
1m  en    made   through    the    purchase   of   timber   lands   in   anticipation    of    future 

ds  of  the  community  for  lumber,  etc. 

It  would  be  difficult  in  a  work  of  this  character  to  give  in  detail  every  influ- 
wrorking  for  -peculation.  But  we  have  seen  that  primarily  speculation  is 
a  ri-k  of  capital  to  secure  profits.  Therefore  money  itself  and  the  rates  of 
interest  are  prominent  factors.  This  necessarily  brings  the  bank,  the  trust 
company,  the  life  insurance  company,  the  individual  capitalist  and  any  one 
who  exerts  some  power  on  money  as  a  direct  or  indirect  factor  in  speculation. 
T  money  seeking  an  investment  plays  a  part  even  in  affecting  mere  gam- 
bin  -  <•)'  speculation.  In  a  similar  manner  anything  affecting  pros- 
perity,  such  as  earnings  of  corporations,  the  yield  of  the  cotton,  wheat,  corn, 

-.    barley,   coffee,    tobacco,    hay    or   other   crops,    the   condition    of   live   stock 
on   the   great    western    ranches,    rainfall   or   drought,   labor  trouble-   and   great 


JUGGLING  WITH  DOLLARS.  201 

fires  or  similar  calamities  work  some  change  in  speculation  by  affecting  values 
of  the  commodities  speculated  in  through  increasing  or  decreasing  supplies. 
This  of  course  influences  prices,  and  speculation  deals  with  prices. 

Even,  then,  if  there  were  no  stock  exchanges  or  boards  of  trade,  as  care- 
fully organized  as  such  institutions  are  today,  time  and  the  news  of  great 
events  would  be  great  factors  in  speculative  markets.  Much  more  so  is  the 
case  today  when  this  business  has  been  developed  to  the  fine  art  it  has  attained. 
We  may,  therefore,  expect  to  see  every  contrivance  imaginable  which  will 
eliminate  time  in  actual  operation  in  the  speculative  markets  today;  and  that 
is  the  case. 

In  the  first  place,  there  are  the  electrical  devices  such  as  the  telegraph  and 
telephone  to  bridge  space  and  time.  The  cable  also  is  brought  into  constant 
service  to  tell  domestic  operators  the  news  of  the  foreign  markets.  In  the  great 
market  centers  special  devices  have  been  evolved,  such  as  the  stock  and  grain 
"ticker" — a  little  electrical  machine  which  prints  quotations  of  the  market  or 
Dews  of  the  trading  which  will  affect  the  trading.  This  machine  prints  upon 
a  narrow  ribbon  of  paper  whatever  is  sent  by  telegraph  from  a  distant  source 
of  news.  This  paper  is  called  the  "tape*'  and  it  is  eagerly  scanned  during 
trading  hours  by  speculator  and  broker. 

Then  there  are  news  agencies  which,  while  using  some  form  of  ticker  to 
transmit  news  or  quotations,  also  give  out  small  slips  printed  with  news  of 
value  to  bankers,  speculators,  brokers,  etc.  The  daily  papers  also  are  of  great 
service  in  speculation,  for  they  disseminate  the  news  which  affects  prices  some- 
times very  markedly.  It  \\a>  recently  estimated  by  the  New  York  Times  thai 
tin'  commercial  and  financial  articles  and  market  reports  published  every  year 
in  all  the  daily,  weekly  and  monthly  publications  of  the  country  would  make 
nearly  two  hundred  and  seventy-one  million  books  of  the  size  of  the  ordinary 
novel. 

Private  telegraph  and  telephone  systems  are  called  into  service  by  broker 
age  firms  doing  hiisiness  in  many  cities.     Thus  a  firm  may  have  headquarters 

in    NVh    York    or  Chicago,  according   to   whether   its    principal    business    i-,    slocks 

or  grain,  or  m  New  York  or  New  Orleans  it'  it  deals  principally  in  cotton,  and 
from  any  of  these  trading  centers  may  string  out   thousands  of  miles  of  wires 

Connecting   hundreds    of   other   cities   and    towns    where    branch    offices    are    main 

tained.     A   private  telegraph  wire  is  necessary  because  secrets  of  great   impor 

tance   might    be   stolen    from    the   wire   if   it    was   in    general    use.       Such   a    privatl 

wire  between  Chicago  and  New  York  cost,  aboul  $15,000  a  year.  Some  houses 
sp.nd  over  $150,000  a  year  connecting  Chicago,  New  York,  Boston.  Milwaukee. 


•.'i»: 


JUGGLING   WITH   DOLLARS. 


Vu  Orleans,  Denver,  San  Francisco,  St.  Louis  and  other  cities  in  one  great 
speculative  system.  With  such  devices  it  is  possible  to  flash  a  piece  of  news 
of  greal  speculative  value  over  the  country  in  a  few  seconds.  Some  offices 
which  relay  quotations,  say  of  the  Chicago  grain  market,  to  hundreds  of  out- 
lying cities  have  the  quotations  written  on  a  huge  blackboard  in  front  of  the 
telegraph  operators,  who  can  see  a  change  in  price  as  soon  as  it  is  made 
and  can  transmit  it  to  branch  offices  without  waiting  for  the  delay  in  handling 


THE    BLACKBOARD    AND    TICKER. 

This   is   a   familiar  scene   in   a   broker's   office.     The   ••ticker''    is   an    instrument   by    which 
supplied   Instantaneously,  almost,   to   brokers  nil  over  the   country.     As  these 

i    they   are    put    on    the    blackboard.       Men    either   at    these    phiees    during 

hours    and    watch    the    fluctuation    in    the    price    of    stocks    and    commodities.       For- 
tunes  are   sometimes  made  and   lost  within  a  tew  hours. 

messages.  In  such  a  telegraphic  system  for  speculators  and  investors  one 
of  the  principal  services  is  the  transmission  of  "gossip"  ahout  the  markets, 
such  a-  i-  given  out  in  the  large  cities  by  the  ticker  agencies.  It  is  the  opin- 
ion of  certain  authorities  that,  while  such  a  complete  system  of  news  gather- 
ing and  dissemination  may  increase  speculation,  it  also  gives  such  instant  noti- 
fication of  any  changes  in  the  financial,  commercial  or  political  world,  that  its 
tendency  is  to  diminish  the  effects  of  commercial  panics  and  crises. 


JUGGLING   WITH  DOLLARS.  120:} 

New    York   Stock   Exchange. 

Undoubtedly  the  greatest  development  in  the  machinery  of  speculation 
has  been  seen  in  the  history  of  the  New  York  Stock  Exchange.  This  is  an 
unincorporated  institution  today,  with  a  limited  membership  of  1,100  men  who 
own  what  are  termed  '"seats"  on  the  exchange.  The  "seats"  or  membership 
have  sold  for  as  high  as  #88,000  each  in  times  of  active  speculation,  suggest- 
ing the  value  of  such  an  association  to  the  broker  who  executes  buying  and 
selling  orders  in  stocks  and  bonds  on  the  floor  of  this  exchange.  The  objects 
of  this  association  are  to  furnish  exchange  rooms  and  facilities  for  convenient 
transaction  of  the  business  of  the  members,  to  maintain  high  standards  of 
commercial  honor  and  integrity  among  its  members  and  to  promote  just  and 
equitable  principles  of  trade  and  business.  While  there  is  much  manipulation 
on  this  exchange,  when  a  member  is  found  guilty  of  a  breach  of  the  stringent 
rules  he  is  expelled. 

In  order  to  transact  business  on  the  exchange  of  course  there  must  be  .some- 
thing to  trade — that  is  stocks  or  bonds.  It  is  impossible  to  buy  or  sell  secur- 
ities which  have  not  been  formally  admitted  by  a  governing  committee  to  the 
trading.  By  reason  of  the  fact  that  this  exchange  is  the  greatest  market 
place  for  securities  in  America,  the  corporations  which  must  finance  their  bus- 
iness through  money  raised  by  the  sale  of  stocks  or  bonds  "list"  their  issue- 
with  the  exchange.  There  are  two  principal  departments  on  the  exchange, 
"listed"  and  "unlisted."  These  include  stocks  and  bonds  that  are  admitted  to 
trading,  those  in  the  former  differing  from  those  in  the  latter  only  by  the 
character  of  the  financial  reports  which  the  exchange  compels  the  corporations 
to  publish  from  time  to  time.  ]\\  means  of  this  publicity  the  exchange  has 
the  power  of  placing  before  investors  needed  information  as  to  the  soundness 
of  corporal  ions. 

About  $15,000,000,000  of  securities  par  value  are  thus  admitted  to  trad- 
ing on  the  New    York  Stock   Exchange.     This  is  a   very  considerable  pail   of 
Hh    wealth  of   the  country,   but    frequently    the   total   capital   stock    of  some  com 
panies,    through    manipulation    or    speculation,    are    turned    over    ten    to    thirty 

times  a  year.     Indeed  sales  nt'  stocks  on  the  exchange  during  1 1)01  were  valued 

at     $25,272,329,220     par    Value.       Ordinarily    about     600,000    shares    of    slo,  I 
.are    bought    and    sold    each    day,    hut     often    more    than    2,000,000    shares    havi 

changed  hands  in  the  five  hours  of  trading  while  on  some  days  the  business 
has  exceed,, |  3,000,000  shares  involving  perhaps  $25,000,000.  Bond  sales 
frequently  exceed  $5,000,000  a  daj  and  sometimes  reach  $11,500,000. 


204  Jl  OGLING    WITH    DOLLARS. 

This  grea1  trading  place  for  securities  is  In  the  heart  of  the  financial  <li-> 
tricl  of  Niw  York  called  Wall  Streei  and  has  one  entrance  on  Wall  Street 
prop.r  and  the  main  entrance  on  Broad  Street,  with  another  on  New  Street. 
The  building  which  houses  this  exchange  is  a  beautiful  new  marble  structure 
with  every  conceivable  convenience  for  trading.  Thousands  of  telephones  are 
connected  with  it.  On  two  walls  of  the  great  board  room  are  1,100  electrical 
enunciators,  or  signals,  which  warn  a  member  that  he  is  needed  at  the  tele- 
phone or  elsewhere.  Even  the  air  which  the  members  breathe  is  filtered 
through  great  cloth  sieves  in  the  basement,  and  as  much  as  fifteen  barrels  of 
water  have  been  extracted  from  the  air  that  enters  the  building  on  a  warm, 
humid  dav. 

When  a  visitor  enters  the  public  gallery  of  the  exchange  the  first  thing 
that  he  sees  is  groups  of  loudly  shouting  men  gathered  about  sixteen  posts 
erected  at  regular  intervals  on  the  floor  of  the  board  room.  The  posts  are 
numbered  and  brokers  or  traders  transact  their  business  according  to  the  allot- 
ment of  specified  stocks  at  certain  posts.  Thus,  if  a  trade  is  to  be  made  in 
United  States  Steel  stocks  it  must  be  at  Post  1.  On  this  post  are  the  names  of 
all  the  stocks  allotted  to  it,  as  well  as  figure  indicators  which  the  members 
move  ti>  record  the  number  of  stocks  sold  each  day. 

So  important  i--  the  immediate  knowledge  of  the  price  at  which  securities 
are  selling  that  a  complete  system  of  recording  and  transmitting  prices  over 
the  country   ha-   been   devised.      Between   each    four   posts   is  stationed  a  tele- 

ph  operator  to  whom  are  brought  by  reporters  as  fast  as  possible  records 
of  all  transactions.  The  sales  are  at  once  ticked  off'  on  the  instruments  and 
relayed  by  "tickers"  all  over  the  world. 

The  visitors  may  ask  just  what  is  being  done  in  the  noise  and  tumult  below 
him  and  a  detailed  answer  may  be  worth  while.  We  have  seen  in  this  and 
preceding  chapters  what  enormous  amounts  of  capital  are  invested  in  the  secur- 
ities of  corporations.  Today  as  never  before  business  is  done  through  co-oper- 
ation of  many  small  capitalists,  although  the  gnat  kings  of  finance  dominate. 
These  hosts  of  smaller  capitalists  furnish,  funds  by  means  of  investing  in  stocks 
or  bonds.  It  is  a  matter  of  history  that  in  179^  during  a  financial  stress  the 
federal  treasury  came  to  tin-  relief  of  the  money  market  by  paying  out  $50,000. 
Some  time  ago  E.  II.  Harriman  said  in  the  presence  of  the  writer  during  the 
famous  litigation  over  the  illegal  Northern  Securities  merger  that  a  deal 
involving  $60,000,000  was  not  of  very  great  moment,  And  it  is  well  known 
that  J.  I\  Morgan  found  little  trouble  iii  financing  the  great  United  States 
-       1   Corporation   with   over  a   billion  dollars  of  capital   stock   and    nearly   half 


JUGGLING   WITH   DOLLARS.  205 

as  much  bonded  debts.  Now,  to  float  Mich  gigantic  undertakings  the  small 
investments  of  the  public-  are  needed  and  the  machinery  of  Wall  Street  and 
the  stock  exchange  i>  necessary  to  the  fulfilment  of  such  great  financial  schemes. 
Let  us  watch  the  ••unloading"  process,  the  method  of  marketing  these  stocks 
to  the  public. 

We  have  -opposed  that  the  promoter  who  conceived  the  idea  of  the  cor- 
poration has  done  his  work  of  getting  a  financial  backer — moneyed  interests 
who  approve  the  scheme — and  that  the  corporation  lawyer  has  drafted  the 
charter  and  bv-laws  of  the  company  under  the  friendly  wing  of  such  an  incor- 
poration law  a-  that  of  New  Jersey.  West  Virginia.  Delaware  or  Maine,  where 
most  trusts  thrive.  The  next  thing  to  do  is  to  get  an  immediate  purchaser, 
or  guarantor  of  purchase  for  the  stock.  The  banker  who  has  approved  the 
scheme  perhaps  is  not   willing  or  able  to  advance  all   the  money. 

The  natural  thing  to  do  is  to  organize  an  underwriting  syndicate.  The 
banker  generally  is  a  principal  of  this  syndicate  and  several  prominent  cap 
italists,  in  some  cases  many  of  them,  may  be  called  in  to  a-i-t.  The  syndicate 
agrees  to  buy  the  stocks  or  bonds  of  the  company,  or  both,  and  to  pay  for 
them  on  the  installment  plan  as  the  company  may  need  the  money.  Generally 
a  certain  percentage  is  to  be  paid  down  at  once  to  aid  the  company  m  pro- 
ceeding with  its  regular  business  of  manufacturing  or  transportation  or  what 
ever  it  may  be.  From  time  to  time  thereafter  certain  "assessments"  may  be 
called    from   the   members   of   the   syndicate   to   supply    the   company    with    money. 

thai   is.  in  the  event   that   the  -ale  of  the  securities  by   the  syndicate  does  not 

progress  well.  In  the  end  the  company  has  all  its  securities  taken  off  its 
hands  and  the  syndicate  is  paid  either  a  commission,  or  is  to  get  its  profii 
between   the  reduced   price  at    which  it   bought   the  stock  and  that   at    which  it 

old. 

About  this  time  the  public  has  been  notified  thai  the  company's  securities 
an  for  sale.  The  manager  of  the  underwriting  syndicate  may  decide  at  once 
to  have  the  securities  listed  on  the  New    York  Stock   Exchange  to  facilitate  in 

marketing    them,   or    he    may    postpone    this    until    .1    more     opportune    lime.       At 

M\  pate,  about  this  juncture  bits  ,,f  information  favorable  to  the  stock  are 
heard.  The  syndicate  manager  calls  in  the  newspaper  men  or  tickers'  agenc) 
reporters  an. I  gives  them  news  of  big  earnings,  actual  or  prospective.  Then 
favorable  rumors  are  heard  about  the  stock  or  bond  in  question. 

At  this  point  .in  actual  market  price  for  the  stock  must  be  established 
somewhere.  If  it  has  been  admitted  to  trading  on  the  exchange  sales  are  made 
there:    if  not.  I  usinei  •  musl  be  transacted  on  the  "curb.'      Tl  i   manipulation  of 


206  JUGGLING   WITH   DOLLARS. 

prices  now  begins.  The  commonest  method  is  for  the  syndicate  to  hire  a 
manipulator,  such  as  did  the  United  States  Steel  Corporation  management 
Inn  J.  P.  Morgan  secured  the  service  of  the  great  market  trader  .lames  U. 
Keene  to  market  the  Steel  stocks.  Naturally  the  puhlie  knows  nothing  about 
a  new  stock  and  is  loath  to  buy  it.  Therefore  the  manipulator  "matches" 
orders  or  makes  some  "wash"  sales.  The  former  is  a  transaction  where  an 
operator  gives  orders  to  two  brokers  or  sets  of  brokers  for  identical  amounts 
of  stocks  to  be  bought  and  to  Ik-  sold  at  the  same  time.  In  the  end  he  has 
neither  increased  nor  diminished  his  holdings,  but  he  had  created  the  impression 
with  the  public  that  there  is  great  activity  in  the  new  stock  and  hence  that 
the  public  is  becoming  interested  in  it.  This  of  course  gives  a  fictitious  value 
to  tin-  stock  and  may  attract  genuine  buying  by  investors.  Manipulation  by 
"wash"  saKs  is  where  two  brokers  conspire  to  make  a  pretended  sale,  simply 
in  order  to  make  a  record  price  for  the  stock.  Such  methods  are  of  course 
contrary  to  the  aims  and  rules  of  the  exchanges,  but  they  are  used  almost 
without  limit  when  unloading  stocks  is  desired,  either  with  new  or  with  old 
irities. 

When  a  semblance  of  demand  for  a  stock  has  been  brought  about  the  active 
speculator  takes  up  the  matter  of  temporary  investment.  Now,  throughout 
the  length  and  breadth  of  the  world  there  are  many  people  who  make  it  their 
business  to  buy  securities  for  the  time  being,  speculators  who  expect  to  sell 
later  when  the  price  has  changed  to  their  profit.  These  are  men  who  study 
conditions  and  are  expert  enough  to  understand  values.  They  fill  the  func- 
tion of  equalizing  prices,  of  buying  up  supplies  when  there  is  a  small  demand 
and  of  selling  to  fill  the  demand  when  the  outstanding  supply  is  short.  In 
times  of  panics  it  may  be  the  great  capitalists  who  are  the  speculators,  taking 
up  great  reams  of  securities  at  low  prices  and  holding  them  until  the  trouble 
has  blown  over.  When  the  manipulator  has  been  successful  in  attracting  the 
speculator  to  the  neu  stock  which  the  underwriting  syndicate  may  wish  to 
dispose  of,  it  mav  be  all  the  stock  can  hi-  sold  at  once  to  this  class.  Or  the 
investing  public  mav  as^i^t   at    this  time.      Let   us  look  at  either  case. 

If  it  i>  the  investor  who  comes  on  the  scene  all  we  have  to  do  is  to  watch 
him  give  his  broker  an  order  to  buy  the  stock,  for  which  he  pays  in  full  in 
-  ,.  plus  a  commission  of  one-eighth  of  one  per  cent.  The  broker  himself 
mav  go  to  the  exchange  and  transact  the  business  or  he  may  have  an  agent 
do  it.  If  we  watch  this  phase  of  tin  business  from  the  gallery  of  the  exchange 
we  -ee  two  men  meet  a  moment  at  one  of  the  posts;  one  offers  a  certain  price 
for  a  certain   number  of  shares  of  stock,  the  other  accepts  or  names  another 


JUGGLIXG   WITH  DOLLARS.  207 

price.  It  is  much  the  same  as  a  horse  trade,  only  on  the  stock  exchange  the 
stock  certificate  does  not  change  hands.  The  brokers  simply  make  an  oral 
agreement  and  take  a  memorandum  of  the  trade.  Later  the  transaction  is 
completed  by  clerks  delivering  the  shares  at  the  purchasing  broker's  office  and 
getting  a  certified  check  in  payment.  All  the  business  on  the  stock  exchange 
is  done  in  this  simple,  trusting  manner,  yet  in  active  business  the  haggling  of 
prices  makes  such  a  din  that  it  can  be  heard  all  over  the  building  and  even 
outside  of  it. 

The  trading  of  the  speculator  is  not  so  simple.  He  trades  almost  invari- 
ably on  margins,  that  is,  he  buys,  say,  $100,000  worth  of  securities  and  pays 
perhaps  $5,000  or  $10,000  for  them,  having  an  incumbrance  of  the  balance 
on  them.  The  reason  he  chooses  to  do  this  is  that  he  can  employ  a  smaller 
amount  of  money  to  a  greater  advantage  than  by  paying  in  full  for  the  stock. 
The  speculator  can  always  borrow  money  from  the  banks  or  trust  companies 
or  from  his  broker  on  the  stock,  for  unless  it  is  a  time  of  panic  securities  are 
generally  good  collateral  at  the  banks  for  loans.  This  speculating  class  may 
be  divided  into  several  kinds  of  traders:  the  "room  trader"  who  is  a  member 
of  the  exchange,  always  ready  to  take  a  position  on  the  market  at  a  moment's 
notice;  the  average  speculating  public  who  buys  or  sells  for  profits  and  no1 
as  an  investor  seeking  an  income,  and  the  "professional"  speculator  who  also 
may  be  a  "room  trader." 

The  onlooking  public  does  not  understand  the  difference  between  such 
speculation  as  that  of  the  "room  trader,"  who  always  is  in  the  market,  and 
ordinary  gambling.  The  difference  Btrictly  speaking  generally  exists,  hut 
sometimes,  even  often,  does  not.  Because  the  fluctuations  of  prices  appear  to 
be  uncertain,  and  indeed  are  so  from  day  to  day,  the  machinery  of  specula- 
tion ser\es  the  purpose  of  gambling  quite  readily.  The  bucket  shop,  which  is 
simply  .hi  imitation  of  a  true  brokerage  office,  thrives  on  pure  gambling.  The 
speculator,  however,  does  his  business  as  scientifically  as  any  business  is  con 
ducted.  It  is  the  speculator's  business  to  know  conditions;  he  may  make  mis 
takes  in  judging  of  values  and  their  relations  to  prices,  but  so  does  every 
business  man  some  time  or  other.     The  greatest   benefit   the  professional  Bpec 

ulator   Serves    is   to   discount    the    future,   as    w .     have    suggested.       When    he   sees 

popular  sentiment  overrunning  itself,  he  checks  it  b\  selling  stock  "short." 
If  the  public  is  getting  drunk  with  a  boom,  or  by  taking  up  slocks  thrown 
over   by    the    frightened    public   in    times   of    panic,   this    process   serves   ;,s   a 

balance    wheel    on    investments   and    on    general    business   ;.s    well. 

It    may    be    set    down,    then,   as    a    fair    nil.'    that    the    man    who    speculates   on 


JUGGLING   11777/    DOLLARS. 

Mind  chance  with  the  hope  thai  prices  will  go  as  he  wishes  is  a  gambler  pure 
and  simple.  The  man  who  judges  of  conditions  and  acts  with  this  judgment 
is  one  who  makes  speculation  his  Legitimate  business.  One  other  rule,  perhaps, 
should  hold  good:  that  the  professional  speculator,  while  appearing  to  do  a 
greal  business  on  a  relatively  small  capital,  does  in  fact  measure  his  means 
with  greal  care,  whereas  the  casual  speculator  who  may  he  a  gambler  in 
spirit  frequently  makes  speculative  contracts  beyond  his  means  and  by  not 
being  able  to  protect  his  transactions  is  "wiped  out"  on  a  small  turn  in  the 
market. 

Chicago  Hoard  of  Trade. 

A-  the  >tock  exchange  serves  the  investment  and  speculative  community 
in  securities  and  aids  corporations  in  securing  money  from  stock  and  bond 
issues  with  which  to  conduct  their  business,  so  the  cotton  exchanges,  the  coffee 
exchanges  and  the  boards  of  trade  and  produce  exchanges  serve  the  farmer, 
the  miller,  the  elevator  man,  the  spinner,  the  roaster,  and  the  speculator  in 
their  respective  commodities.  And  for  the  purpose  of  considering  the  methods 
of  these  exchanges  let  us  take  as  an  example  the  Chicago  Board  of  Trade, 
in  which  centers  the  principal  grain  and  provision  trade  of  the  world.  This 
institution  is  chartered  under  the  laws  of  Illinois,  not  to  do  business  itself,  but 
to  maintain  an  exchange  hall  and  to  regulate  the  action  of  its  members,  who 
number  about  1,800  persons.  Memberships  on  this  exchange  are  worth  about 
$3,500.  One  of  the  principal  functions  of  the  Board  of  Trade  is  to  raise  the 
standard  of  commercial  honor  as  conceived  under  the  present  commercial  and 
competitive  system,  to  establish  grades  of  grain  which  shall  be  deliverable  on 
contracts  and  to  discipline  members  who  do  business  in  an   illegitimate  manner. 

The  machinery  of  speculation  on  the  board  of  trade  is  not  unlike  that  on 
tin-  stock  exchanges.  Instead  of  "posts"  at  which  trading  is  done,  this  board 
i-  equipped  with  what  is  called  "pits."  These  are  octagonal  platforms  in 
the  shape  of  ascending  and  descending  steps  surrounding  an  open  space.  Pos- 
sibly  more  accurately  the  pit  is  the  open  space  surrounded  by  these  steps.  On 
these  steps  and  in  the  pit  the  men  who  have  transactions  to  make  congregate 
and  "hid*"  and  "a^k."  There  are  four  pits  on  the  Chicago  Board  of  Trade, 
oik-  each   tor  wheat,  corn,  oats  and  hog  products. 

The  rise  to  importance  of  this  board  came  with  tin  rise  of  Chicago  as  a 
great  shipping  center.  The  city  occupies  a  strategic  railway  and  lake  posi- 
tion. With  the  development  of  the  great  live  stock  and  packing  industries 
at  its  stock  yards  and  of  the  business  of  sending  grain  through  it  to  mills  or 


JUGGLING   WITH  DOLLARS. 


209 


to  foreign  ports,  an  intricate  machinery  to  handle  business  in  many  of  these 
food  products  of  the  world  found  growth  on  the  Board  of  Trade.  In  time 
the  "future"  contract  was  found  to  be  serviceable  and  speculation  was  fostered. 
But  lest  the  reader  gain  wrong  ideas  of  the  magnitude  of  speculation  in  grains 
and  provisions  compared  with  direct  cash  business  in  these  Commodities,  let  it 
be  said  that  in  a  good  year  Chicago  receives  27,225,000  bushels  of  wheat  and 


TRADING    "PITS"    Or    TEX    CHICAGO    BOARD    OF    TRADE. 

Traders  are  divided   Into  two  groups  known  as  "bulla"  and  "bears."     Any  man   holding 
mmodity   and    wishing   t"  sell   It,  or  holding  ;>    future   privilege   to  call    foi    M    at    :i    fixed 
price,  naturally  desires  to  see  t  J  i  *  -  price  of  tiiis  commodity  rise,  and  devotes  ins  energy   t" 
hoisting  tii''  price  in  any  way  possible  and   in  therefore  known  at   a   bull.     The  bear   i 
one   who   wishes  i"  buy  a   commodity,  or  who  has  an  outstanding  contracl    to  delivei 
Axed  price  at   a   future  time,  thai  which  he  h:is  not   now  In  hand,  and  his  interest   then 

■  depreciate  the  price,     it   is  tins  condition  that   makes  the  eternal  quarrel   between   1 1 » •  • 
lements  on    t  he  market. 


ships  out  as  much)  and  handles  in  the  Bame  manner  Borne  9,000,000  barrels  of 
flour,  over  1  ()(),()()(),()()()  bushels  of  com  and  nearly  as  much  oats,  while  its  li\<' 
stock  and  packing  business,  pari  of  uliidi  enters  into  the  business  on  the  board, 
runs  up  to  $600,000,000  annually. 

Prior  to  trading  in  "futures"  Chicago  largely    was  a   cash  market.     This 
broughl  all  sorts  of*  uncertainties.     If   a   farmer  ordered  an  agent    in  Chicago 


210  JUGGLING  11777/  DOLLARS. 

to  sell  a  certain  quantity  of  grain  he  had  in  his  farm  bins  it  often  proved  on 
delivery  thai  the  grain  was  not  good  standard.  On  the  other  hand,  the 
fanner  almost  .dwavs  waited  until  his  grain  was  harvested  before  taking 
advantage  o\'  the  market.  Today,  however,  the  farmer  knows  just  what  is 
standard  grade  deliverable  on  contracts  on  the  Chicago  Board  of  Trade. 
Either  he  or  the  grain  dealer  at  the  small  country  city,  by  means  of  the 
"future"  contract,  can  sell  grain  which  has  been  stored  away  to  dry  without 
waiting.  He  insures  his  profit  against  a  change  in  the  market.  But  if  he 
did  not  take  advantage  of  these  methods,  which  minimize  risks,  and  waited  for 
all  the  changes  in  the  market  up  to  the  time  he  could  deliver  his  grain,  he 
would  be  speculating  more  than  otherwise.  Millers  do  the  same  thing  by  buy- 
ing wheat  for  future  delivery  on  the  board  of  trade,  thus  insuring  themselves 
a  supply  to  make  flour  with  when  the  given  day  comes  around.  This  enables 
both  farmer  and  miller,  as  well  as  the  middle  grain  man,  to  equalize  supply 
and  demand  and  to  reduce  risk  in  their  business.  It  is  all  done  scientifically 
and  smacks  of  speculation,  but  in  no  wise  is  it  gambling. 

But  there  is  some  one  who  does  do  the  speculating  and  gambling.  Of  the 
latter  it  may  be  said  conditions  in  the  grain  and  provision  market  obtain  as 
in  the  stock  market.  The  distinctly  gambling  operations  are  those  done  on 
blind  chance,  with  little  science  and  often  with  limited  capital,  so  that  the 
intention  of  the  speculator  evidently  is  to  gamble  simply  on  the  changes  in 
prices.  The  speculator  in  grains,  as  in  stocks,  is  a  man  of  a  class  who  studies 
conditions  of  supply  and  demand,  flood  and  drought,  etc.,  figures  scientifically 
what  commodities  are  worth,  and  trades  accordingly.  But  let  us  take  the 
finding  of  the  government  Industrial  Commission  of  1898,  appointed  to  report 
on  speculation  in  agricultural  products,  as  judgment  of  the  position  of  the 
professional  speculator  in  the  grain  market.     That  report  says: 

"The  first  fact  to  be  recognized  in  the  survey  of  the  American  system  of 
distributing  farm  products  is  that  it  is  essentially  a  speculative  system  from 
beginning  to  end — speculative  in  a  sense  that  after  the  products  pass  out  of 
the  producers'  hands  and  until  they  pass  into  the  consumers'  control,  there  is 
not  a  moment  nor  a  stage  in  the  distributive  movement  during  which  the  one 
who  has  legal  control  over  the  property  in  question  does  not  run  the  risk  of  a 
rise  or  fall  in  the  value  of  the  property.  With  the  growth  in  the  volume 
and  scope  of  production  and  in  the  variety  and  the  complexity  of  operations 
involved  in  the  marketing  of  the  product  of  the  farm,  there  have  grown  up 
gradually  classes  of  men  and  commercial  methods  peculiar  to  the  purposes 
and   conditions   which   call   them   into  existence;    but   in   the  vast   army   of   men 


JUGGLING  WITH  DOLLARS.  211 

and  in  the  infinite  variety  of  methods  there  is  not  a  single  responsible  agency 
engaged  which  is  not  in  some  way  required  to  assume  liability  for  loss  or  gain 
from  changes  in  value  occurring  in  the  course  of  distribution  from  the  pro- 
ducer to  the  consumer.  In  brief,  the  risks  of  distribution  are  shifted  by  both 
producers  and  consumers  upon  the  distinct  class  of  speculators  known  as  dis- 
tributers, who  make  it  a  business  to  take  such  risks  and  to  divide  them  up  among 
themselves  on  the  basis  of  net  profit  on  capital  and  cost  of  business  capacity. 
This,  in  the  final  analysis,  is  the  underlying  factor  in  the  svstem  of  distrib- 
uting  farm  products  in  the  United  States. 

"Stated  in  the  form  of  propositions  the  distributive  system  presents  itself 
as  follows: 

"First — The  existing  system  of  distributing  that  portion  of  the  surplus 
farm  products  which  is  required  for  domestic-  consumption  is  the  necessary 
outgrowth  of  the  fundamental  division  of  labor  between  town  and  country  in 
our  national  development. 

"Second — This  distribution  of  surplus  farm  products,  regarded  as  a  com- 
mercial system,  is  a  development  out  of  the  constantly  widening  distance 
between  the  areas  of  surplus  production  and  centers  of  consumption  arising 
from  the  territorial  expansion  of  the  United  States. 

"Third — The  distribution  of  the  excess  of  surplus  farm  products  among 
tin-  deficit  nations  of  the  earth — that  is,  the  distribution  of  that  portion  not 
required  for  domestic  consumption-  involves  so  many  elements  of  risk  to  cap 
ital  and  labor  as  to  make  this  world-wide  service  to  society  a  distinctly  spec- 
ulative business  of  an  altogether  too  hazardous  character  for  producers  or 
consumers  to  render  without  subjecting  society  to  still  greater  risks  of  pro 
(riding  a  regular  food  supply. 

"Fourth-  These  speculative  risks,  inseparable  from  the  national  distribu 
tion   of  surplus   farm    products,   have   inevitably    reacted    upon    producing  and 

Consuming    nations    in    such    a    way    as    to    develop    a    new    division    of    labor,    thai 

of  capitalist  speculator,  whose  function  it   is  to  relieve  both  producer  and  con 
Burner  of  the  hazards  of  distribution,  so  that  the  surplus  of  one  portion  of  the 

•  arth  may  regularly  be  supplied  to  the  deficient  portion  at  such  a  price  as  in 
the   long   run   will  a   little   more  than   balance   the  gains  ami    loss,  -,  of  this  species 

of  commercial  enterprise,  without  unduly  enhancing  the  cost  to  the  consumer 
or  unduly  depressing  the  margin  of  profit  to  the  producer. 

"Why  has  commercial  distribution  in  the  United  States  become  so  large|\ 
identified  with  .1  speculative  class  of  trading  capitalists?  The  answer  is  th.it 
it    has    been    found    best    for    the    producing   and    the    consuming    interests    of    the 


218  JUGGLING   11777/   DOLLARS. 

community  thai  the  risks  of  distribution  should  be  localized  In  a  separate 
commercial  class,  whose  members  are  in  a  position  to  inform  themselves  as  to 

all  the  factors,  past,  present  and  prospective,  affecting  the  future  course  of 
prices.  If  the  risks  of  distribution  fell  upon  the  farmer,  it  would  increase 
materially  the  risks  of  capital  required  and  thus  raise  the  rate  of  interest  he 
should  have  to  pay  as  producer,  because  increased  risks  always  raise  the  rate 
of  interest.  This  would  increase  the  cost  of  production  and  consequently 
tend  to  reduce  consumption  by  rise  of  price  to  consumers.  Such  rise  of  price 
beyond  a  certain  point  would  reduce  the  volume  of  trade. 

"If  consumers  assumed  the  risks  of  distribution  there  would  be  very  inade- 
quate provision  for  the  future.  Irregular  supply  of  subsistence  soon  breaks 
down  the  economic  efficiency  of  consumers,  besides  impairing  their  regular  con- 
suming capacity  as  customers  of  the  producers.  Hence  the  community — pro- 
duct irs,  traders  and  consumers — all  suffer  together.  Regularity  in  supply  of 
the  means  of  subsistence  is  a  great  desideratum  in  economic  welfare,  but  it  is 
so  automatic  a  process  that  we  really  do  not  notice  how  it  is  accomplished. 
The  work  is  done  through  the  medium  of  a  market  price:  a  higher  price  brings 
forth  more,  a  lower  price  brings  forth  less.  Now,  it  is  the  speculator  who 
has  to  decide  in  advance  on  the  price  at  which  a  regular  supply  will,  in  all 
probability,  be  forthcoming  from  producers  in  sufficient  quantity  to  meet  the 
regular  requirements  of  the  consumer.  One  speculator  might  place  the  future 
market  price  too  high,  another  too  low,  but  as  a  class  they  correct  and  check 
one  another.  It  is  to  their  interest  as  distributers  to  call  forth  all  that  the 
consumer  will  take,  and  no  more. 

"Speculators  as  a  class,  therefore,  are  interested  primarily  in  a  correct  judg- 
ment, as  much  so  as  is  either  the  producer  or  the  consumer  of  the  product 
in  which  the  trader  speculates.  If,  for  instance,  the  Liverpool  wheat  specu- 
lator should,  through  an  error  of  judgment  or  calculation,  set  the  price  of 
May  wheat  10  cents  below  the  correct  world  price,  the  surplus  stock  would 
meanwhile  be  distributed  elsewhere  until  the  shortage  in  the  Liverpool  supply 
hi  came  evident  from  a  rise  in  price  paid  by  consumers.  This  would  bring 
some  of  the  misdirected  shipments  to  Liverpool,  but  not  so  much  as  if  the 
blunder  had  not  been  made  in  the  beginning;  other  places,  whose  speculators 
more  correctly  anticipated  future  prices,  would  supply  themselves  more  fully 
than  usual.  Thus  the  volume  of  trade  at  Liverpool  would  be  reduced  by  a 
valuation  too  low  to  bring  an  adequate  supply;  the  consumers'  customary 
demand  would  be  inadequately  supplied  at  the  undervalued  price,  and  the 
total  expenses  of  distribution  increased  by  the  defective  judgment  of  the 
speculator. 


JUGGLING   11777/  DOLLARS.  213 

"These  two  kinds  of  service  are  peculiar  to  speculative  distribution  the 
service  of  assuming  the  risks  that  arise  from  changes  in  the  relation  of  demand 
and  supply  and  the  service  of  giving  the  right  direction  to  the  commodities 
available  for  consumption.  Even  in  famine-stricken  India  the  government 
regards  speculative  distribution  of  supplies  as  on  the  whole  far  more  efficient 
than  any  bureaucratic  distribution  could  be.  Without  this  modern  markets 
would  be  deprived  of  a  very  great  share  of  their  efficiency  in  serving  pro- 
ducers and  consumers.  In  fact,  those  who  have  thought  out  the  subject  more 
thoroughly  have  found  in  this  directive  work  of  speculation  the  chief  justifies 
tion  for  its  existence.  Where  government  has  assumed  even  part  of  the  risks 
of  crop  distribution,  as  in  Russia,  piles  of  wheat  rot  in  one  section,  while 
people  starve  in  the  next." 

The  Barometer  of  Business. 

Most  people,  when  they  hear  of  Wall  Street  or  stock  speculation,  think  first, 
and  often  only,  of  the  gambling  phase  of  the  markets.  There  is.  however,  a 
very  differeni  view  of  what  is  taking  place  in  the  gnat  marble  halls  of  the 
New  York  Stork  Exchange  and  the  other  bourses  of  the  world.  For.  in  a 
word,  the  stock  market  is  almost  the  infallible  barometer  of  business  conditions. 
Frequently  you  hear  a  banker  or  railway  president,  perhaps,  and  often  the 
newspapers  say  thai  Wall  Street  is  the  only  blue  spot  in  the  country,  that  the 
panics  on  the  stock  exchange  amount  to  nothing  and  that  the  changing  of 
hands  of  untold  fortunes  or  the  advance  or  decline  of  stock   prices  mean  noth 

ing.      Then    just   as  surely  as   the  seasons  rotate  you   will   find   business  conditions 
change  according  to  the   forecasts  of  the  stock   market. 

I-Yu     people    understand    how    far    the    market     in    stocks    reflects    conditions 

that  exist  in  general  business  or  to  what  an  extent  the  investment  of  capital 
in  other  avenues  than  those  of  the  corporate  underakings  is  directed  In  it. 
often  it  is  said  the  merchant,  the  manufacturer,  the  real  estate  dealer  or  the 
like  need  pa v  no  attention  to  what  is  going  on  in  Wall  Street.  But  this 
market  for  stocks  reallj  is  the  market  for  all  uninvested  capital;  it  guages  the 
am. >nni  of  the  supply  and  tests  accuratel}  the  demand  for  it.  When  prices 
of  stocks  are  high  the  suggestion  is  thai  some  one  must  be  anxious  to  own 
them  that,  indeed,  they  must  be  earning  good  money,  for  capital  seeks  invest 
ment  where  it  can  earn  good  money.  When  Btocka  are  high  it  is  readilj 
jeer  that  those  who  arc-  operating  business  in  corporate  form  will  be  encouraged 
t,,  start    ne*   enterprises  which  shall  be  operated  by   ne*   notations  of  cnpitfll 


SI  4  JUGGLING   11777/  DOLLARS. 

stocks.  For  n  demand  for  stocks,  like  anything  else,  will  find  some  one  meet- 
ing the  supply. 

When  there  is  abundant  fruit  of  prosperity  visible  in  the  form  of  idle 
money  in  the  savings  hanks  or  elsewhere  the  owner  of  this  money  generally 
wants  to  invest  it.  This  was  seen  in  the  accumulation  of  wealth  after  the  hard 
times  of  1SJ):5.  People  in  great  number  sought  investments.  They  began  to 
buy  freely  of  stocks  and  bonds  as  well  as  of  real  estate  and  other  forms 
oi'  wealth.  They  paid  off  their  mortgages,  if  any  encumbered  their  properties. 
The  great  captains  of  industry  saw  that  there  were  not  enough  supplies  of 
stocks  and  bonds  to  absorb  all  the  money  that  was  accumulated  and  they  also 
saw  it  was  an  auspicious  time  to  start  new  enterprises  which  were  to  be  started 
by  the  flotation  of  issues  of  stocks  and  bonds.  The  active  demand  for 
stocks  in  the  boom  after  President  McKinley's  election  ran  into  a  craze  for 
speculation  and  this  caused  such  zealous  promoting  by  scheming  capitalists  that 
they  overdid  the  thing.  But  the  great  boom  in  stocks  showed  what  were  the 
sinews  of  strength  of  the  nation  and  was  a  fore-runner  of  the  great  com- 
mercial boom  in  which  the  business  of  the  United  States  was  the  greatest  in 
history. 

Hut  when  the  ovcrspcculation  had  caused  great  risks  to  be  taken  by  the 
people  in  buying  watered  stocks,  etc.,  there  was  a  time  when  the  stock  market 
called  a  halt.  This  was  in  the  fall  of  1902.  For  over  a  year  there  was  a  state 
nt'  semi-panic  in  the  stock  market  with  prices  of  investments  in  stocks  and 
bunds  going  down  almost  constantly.  Then  it  was  that  people  who  did  not 
understand  said  Wall  Street  was  nothing  but  a  nest  of  gamblers.  Wall 
Street,  however,  knew  how  the  capitalists  had  issued  too  many  stocks  and 
bonds' — indeed  so  many  that  the  public  would  not  buy  them  and  J.  P.  Morgan 
called  them  "undigested  securities."  While  this  had  been  going  on  the  busi- 
ness  man  who  was  running  his  affairs  on  money  raised  or  to  be  raised  through 
the  sale  of  securities  had  been  building  so  many  factories  that  pretty  soon 
there  were  more  than  could  be  used  at  the  time  to  a  good  advantage.  This 
was  true  (specially  of  iron  and  steel  mills.  Such  a  condition,  coupled  with  the 
condition  of  "undigested  securities"  set  the  stock  market  men  to  thinking. 
They  could  sell  no  more  stocks  to  the  public  and  they  were  afraid  the  new 
factories  and  mills  could  not  be  kept  busy  enough  to  earn  money  on  the  stocks 
and  bonds  by  means  of  which  they  had  been  erected.  This  made  the  stock 
market  speculator  begin  to  sell  stocks  "short" — stocks  he  did  not  possess,  with 
the  idea  that  when  the  price  of  securities  was  forced  down  he  could  buy  in 
enough  to  cover  his  "short"  contracts  at  a  good  profit.     Soon  all  stock  specu- 


JUGGLING   WITH  DOLLARS.  215 

lators  were   working   in   this   manner.      This   frightened    the   public.      No   new 

stocks  were  bought  by  investors  save  at  lower  prices  mid  many  old  ones  were 
sold  out. 

About  this  time  some  of  the  railway  managers  needed  to  buy  new  rails, 
cars,  locomotives,  etc.,  in  order  to  improve  their  facilities  for  transportation  in 
the  recently  increased  business  field.  They  wanted  to  sell  stocks  or  bonds  with 
which  to  do  this  but  no  one  would  buy  except  at  prices  too  low  to  consider. 
At  the  same  time  people  began  to  feel  panicky  and  wanted  to  hold  their  own 
money.  This  made  money  rates  high  and  contributed  to  the  stringency 
caused  by  recent  overspeculation.  Therefore,  the  railway  managers  could 
not  keep  steel  mills  busy  with  their  orders.  With  business  in  steel  and  iron 
decreasing  rapidly  companies  in  this  business  could  not  earn  money  enough 
to  pay  all  their  dividends.  So  this  in  turn  hurt  tin-  prices  of  stocks.  After 
a  time  banking  business  fell  off  and  railway  earnings  declined  because  of 
decreased  general  business.  It  was  only  when  this  process  was  carried  to  the 
extent  that  money,  which  had  been  secured  from  selling  stocks,  from  stopping 
work  here  and  there  and  otherwise  had  begun  to  accumulate  that  the  people 
began  to  realize  that  there  was  wealth  enough  in  the  country  to  start  business 
ahead  once  more.  Then  it  was  again  the  stock  speculator  who  first  discovered 
this.  And  at  once  he  began  to  advance  the  price  of  stocks,  which  foretold  the 
revival  of  business  again.  For  as  soon  as  stocks  and  bonds  could  be  absorbed 
by  people  with  idle  money  once  more,  the  railway  managers  sold  new  issues 
and  with  the  proceeds  bought  new  rails  and  other  equipment.  The  steel  and 
iron  mills  began  to  hum  with  industry  again.  They  earned  new  dividends 
and  in  turn  this  helped  the  price  of  -stocks  again. 

BecaU8e  of  the  fact  that  shrewd  business  men  regard  Wall  Street  as  a 
good   prognosticator  of   future  busings  events,   Wall   Street    naturally    is  always 

looking  ahead  some  months.     Frequently  when  prices  are  booming  in  the  -lock 
market  conditions  are  being  developed  which  shortly  may  hurt   business.     Then 

Wall    Street    lakes    I  he   other    tack,   and    the   business    world    wonders    what    Wall 

Street   possibly  can  see  ahead  that   suggests  danger  when  everything  seems  to 

he    going    along    so    swimmingly.       On    the    other    hand,    when    things    begin    to 

look  the  bluest   in  general  business  Wall  Sheet   frequently  i-  the  first   spol   to 

reflect    brightness. 

In  this  business  of  discounting  the  futur<  Wall  Sheet  takes  accounl  of  tie 
crops.  Will  they  be  good  or  bad?  Wall  Street  must  know,  for  if  the}  an 
to  be  good  it  means  more  dividends  to  the  stockholders  of  the  railways  which 
carrj  the  big  crops;  or  if  thej  are  bad  it  means  lessened  earnings. 


STATE    STREET,    CHICAGO. 

'the  greatest  ^^ 
^TSZtelt^X™  fc'sfew!:;k»'.'it.wSnrth...r  w£  *<>ng  during  any  hour  of  the 
day. 


CHAPTER    XVI 
DIFFERENCE  BETWEEN  SPECULATION  AND  INVESTMENT. 

./  Majority  of  the  American  People  are  Speculators — Invest  Their  Money 
Blindly  in  Securities — Do  not  Know  the  Difference  Between  Saving  and 
Speculation — Real  Estate  the  Real  Safe  Divestment. 

We  have  already  seen  in  the  chapters  on  the  Money  Trust  and  tin  Insurance 
Trust  where  the  greater  part  of  the  savings  of  the  people  are  placid.  We 
know  that  in  the  savings  banks  alone  there  are  deposited  over  $3,000,000  of 
the  >avings  of  the  people  of  the  United  States,  representing  over  7, 000, 000 
depositors.  And  the  life  insurance  companies  hold  assets  to  the  amount  of 
over  $2,500,000,000.  It  has  been  estimated,  that  by  reason  of  souk  people 
holding  more  than  one  insurance  policy  and  some  people  having  more  than 
one  savings  bank  account,  the  savings  in  these  two  principal  savings  mediums 
are  controlled  by  about  8,000,000  people — or  about  one-tenth  of  the  inhab- 
itants of  the  country.  In  the  chapter  on  the  world's  savings  bank  deposits 
ire  saw  that,  while  the  United  States  stood  at  the  top  of  the  list  of  countries 
for  the  amount  of  money  saved,  it  stood  fifth  in  the  matter  of  the  number  of 
savings  bank  depositors.  Therefore  we  learn  that  in  proportion  to  the  num- 
ber of  inhabitants  of  the  country  we  fall  behind  Germany,  France,  the  United 
Kingdom  and  Japan   in  frugality. 

\ou,  what  a  nation  saves  constitutes  a  nation's  capital.  It  is  a  good  prin- 
ciple to  save,  but  it  is  unwise  for  a  nation  to  become  miserly.  Therefore  that 
which  will  promote  the  greatest  enterprise  and  general  well  being  is  the  best 
thing  for  the  country.  This  comes  through  investing  savings  wisely  so  that 
many   small   simis  of   money    will   go  toward   strengthening  a   nation    in    its   work 

of  progress.     The  people  of  France  have  long  been  known   for  their  saving 

ability    and    the    habit    of    investing    their    savings    where    llu\     will    do    the    most 

good  as  a  whole.  Prance  is  one  of  the  richest  countries  of  the  world  and  her 
financial  power  is  enormous  on  account  of  the  frugality  and  aggregate  savings 

of  her  people,  yet  the  amount  of  her  deposit-,  in  savings  banks  is  even  less 
than    those   of    Austria    and    Compare    with    the    United    Slates    as    S    to    80.       Hut 

the   French   people   are  b   class   of   small    investors   in   securities.     While   the} 

Ml  7 


218  SPECULATION  AND  INVESTMENT. 

may  have  suffered  severely  at  times  because  of  misplaced  confidence,  as  threat- 
ened to  be  the  case  in  their  holding  great  amounts  of  Russian  bonds  during 
the  Russo-Japanese  war.  there  can  be  no  doubt  that  on  the  whole  the  people 
of  France  are  much  better  off  because  of  their  habit  of  investing  directly  in 
securities. 

Here  in  the  United  States  we  stand  the  richest,  people  of  the  globe  and 
also  the  most  prosperous.  Hut  this  is  not  because  of  our  savings.  Rather 
it  is  because  of  the  great  wealth  of  the  country  that  our  savings  arc  as  large 
as  they  are.  The  savings  of  this  country  arc  given  over  to  other  people  like 
the  banker  and  life  insurance  manager  in  trust  to  control,  well  if  possible, 
badly  frequently.  It  is  believed  by  many  good  and  competent  judges  it  would 
add  much  to  the  welfare  of  the  country,  and  also  would  help  to  check  concen- 
tration by  a  few  men  in  the  Money  Trust  and  in  the  Insurance  Trust,  if  the 
people  as  a  whole  would  make  intelligent  investments  of  their  savings  in  secur- 
ities This  is  not  intended  to  discourage  life  insurance,  for  that  is  a  great 
factor  for  laving  up  something  for  old  age  or  in  the  case  of  death.  Nor  is 
it  desired  that  savings  in  the  banks  of  the  country  be  discouraged.  Rather  it 
is  to  be  desired  that  more  saving  be  done  and  that  in  such  a  manner  as  will 
tend  to  distribute  more  widely  through  the  people  the  ownership  of  the  great 
producing  and  distributing  agencies  of  the  country  and  to  a  large  extent  to 
bring  these  agencies  under  the  more  direct  control  of  the  people  instead  of 
concentrating  them  in  a  few  hands. 

The  trouble  in  making  investments  is  that  the  average  person  does  not 
know  the  difference  between  this  form  of  saving  and  speculation.  It  may  be 
said  what  is  one  man's  investment  in  another's  speculation,  and  what  is  one 
man's  speculation  may  be  another's  business.  It  has  been  shown  how  specula- 
tion is  a  business  transaction  for  profit  which  involves  risk.  To  invest  pri- 
marily  is  to  lav  out  money  with  the  view  to  making  profits  with  a  small  amount 
of  ri^k.  Furthermore  investment  suggests  a  more  permanent  use  of  capital 
a-  opposed  to  speculation.  Thus  the  principal  laid  out  in  investment  is  ex- 
pected  to  remain  intact  and  to  bring  in  a  regular  income,  whereas  speculation 
risks  the  principal  for  a  short  time  in  the  hope  of  a  large  profit.  In  the  stock 
market  it  is  customary  to  speak  of  an  investment  as  being  the  purchase  of 
high  class  securities  which  yield  a  low  rate  of  income,  these  securities  to  be 
paid  for  in  full  and  put  away  for  permanent  keeping.  Speculation  in  the 
^tork  market  is  regarded  as  trading  on  "margin"  in  a  large  amount  of  stocks 
and  with  a  small  amount  of  capital,  with  a  hope  of  closing  out  the  transaction 
soon  with  profits.     Here  it  is  merely  the  fluctuation  in  price  which  is  considered 


SPECULATION  AND  INVESTMENT.  219 

in  speculation  and  it  docs  not  matter  much  for  this  purpose  whether  the 
securit}-  has  an  income  or  not.  Thus,  it  is  seen,  what  may  be  the  relative 
difference  between  permanent  investment  and  quick  speculation,  between  a 
transaction  that  calls  for  security  and  one  that  necessitates  risk. 

•  But  many  so-called  investments,  especially  if  they  are  made  with  poor 
judgment,  are  less  permanent  and  more  risky  than  speculative  transactions. 
The  man  who  makes  it  his  business  to  speculate  in  stocks  may  risk  less  than 
many  people  who  are  not  expert  may  lose  in  investments.  To  such  a  trader 
speculation  is,  in  a  large  degree,  an  investment — an  investment  in  his  regular 
business.  A  person  who  has  devoted  a  life  time  to  the  study  of  mining 
properties  might  put  his  money  into  a  mining  stock  with  such  knowledge 
as  to  make  the  transaction  an  investment;  while  for  the  majority  of  people 
this  would  be  a  speculation.  What  might  be  considered  an  investment  by  a 
business  man  would  be  a  speculation  in  the  case  of  a  woman  or  the  guardian 
of  trust   funds. 

Now,  it  is  of  greatest  importance  to  get  a  clear  idea  in  regard  to  fhis 
matter  if  one  has  money  to  invest.  The  first  thing  he  must  decide  is 
whether  he  really  wants  to  invest  or  to  speculate.  If  the  latter  he  must  choosi 
deliberately  to  accept  great  risks  for  the  chance  of  making  possible  great 
gains.  For  instance,  if  some  big  railway  project  is  to  be  started  which  needs 
funds,  it  may  be  some  time  before  the  road  would  earn  money  enough 
to  pay  dividends  on  its  stock  regularly  and  thus  make  it  an  investment. 
Vet  it  would  be  perfectly  legitimate  for  one  to  put  money  into  the  enterprise 
if  one  believed  profits  eventually  could  be  made  out  of  the  transaction. 
Such  a  deal  is  nothing  hut  speculation;  though  to  the  man  who  knows  all  the 
details    and    weighs    all    the    risks    and    chances    it     may    appear    as    clear    as    an 

investment  as  government  bonds  would  to  a  hanker.     Indeed,  the  great  railways 

and    industrial    enterprises    of    the    country    were    built    upon     just     such    risk 

Ip  .illation. 

If  a  man  wants  to  make  an  investment  he  must  decide  uhal  kind  he  will 
niter.  If  it  is  an  investment  which  he  has  the  time  and  intelligence  to  watch, 
keeping  track   <»f  e\erv   changing  condition   of  business  he  can   afford   to   put    his 

money  into  securities  which  yield  a  comparatively  high  income  and  it  is  a 
rule  in  finance  that  wherever  there  is  "  high  rate  of  income  there  it  <m  element 
,,[   rule.      Bui    if   In-    (rants    an    investment    thai    will    relieve    him    from    any 

anxiety,    bv     ,:_n\iug    him    absolute    security,     he    must     be    content     with    a     low 

income.     Security  and  safetj  musi  be  paid  for  like  anj  other  asset,     for  man} 

peo,,ie.  no  other  investment    than  the   latter  ought    to  he  entered   into.     This 


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SPECULATION  AND  INVESTMENT.  221 

rule  really  applies  to  the   majority   of  people;   certainly   those   whose   capita] 

consists  of  savings  from  small  wages. 

Yet  it  is  exactly  to  this  class  of  investors  that  the  promoters  of  the  wildesl 
schemes  of  finance  appeal.  It  is  exactly  this  class  which  is  most  fascinated  by 
wild  stories  of  impossible  dividends  amounting  to  50  per  cent,  100  per  cent 
or  even  500  per  cent  a  year  and  other  "get-rich-quick"  propositions.  Some- 
times schemers  bring  all  sort  of  arguments  to  hear  to  fleece  the  people 
of  their  savings.  Often  circulars  are  sent  out  making  fun  of  the  old  financial 
adage  that  "anything  which  pays  more  than  the  4  per  cent  paid  by  savings 
banks  is  risky."  Arguments  are  made  that  if  this  he  true  it  must  lie  risky 
to  put  money  in  the  savings  banks,  because  the  only  use  the  hank  has  tor  the 
money  is  to  put  it  into  some  earning  more  than  4  per  cent.  Such  contention 
often  goes  on  to  say  that  when  a  person  accepts  4  per  cent  from  a  hank  he 
virtually  pays  that  bank  four  to  six  per  cent  of  the  earnings  of  his  money 
for  the  use  of  the  bankers'  judgment.  Now  this  sounds  plausible  and  doubt- 
less it  brings  many  dollars  to  the  schemer,  dollars  that  doubtless  ought  to  be 
put  into  savings  banks  because  their  possessors  have  not  the  intelligence  nor 
the  time  to  invest  for  themselves.  In  reality  it  is  deceitful.  The  law  which 
rigidly  restricts  the  investments  of  savings  banks  shows  what  experience  has 
demonstrated  as  being  the  only  kind  of  investment  a  certain  class  of  people 
should  enter  into.  It  would,  however,  be  absurd  to  restrict  a  business  man  to 
an  investment  of  a  savings  bank  character.  He  wants  something  that  pays 
better,  and  he  has  the  capacity  to  look  after  it.  Vet  even  he  may  keep  a 
certain  reserve  in  a  low-income  investment,  in  order  to  obtain  thai  safetj 
which  is  the  only  protection  against   the  approach  <>f  disaster. 

Recently  the  Equitable  Life  Assurance  Society,  in  speaking  of  its  method 

of  invesl  ing  trust    funds,  said  : 

"There  is  one  way   in   which  dividends  to  policj  holders  might    be   largcl} 
augmented,   but    it    is  a    way    which   will    never   be   countenanced   b\    the   managers 

„f    the    Equitable.      That    way    would    be    to    invesl    in    speculative    ventures. 

The     income     from     the    Society's     invested     funds    might     be    greatly     increased 

If  5UCh  a  course  should  he  followed  for  it  might  result  in  a  large  temporary 
increase  in  dividends  to  policy  holders,  but  deterioration  would  be  the  inevitable 
consequence,  and  the  Equitable  would  cease  to  deserve  a  full  measure  of  public 
conlidei.ee.  What  is  true  of  individual  investments  is  equally  true  of  the 
aggregate  investments  of  a  gnat  organization.    High  interest  suggests  possible 

risk  to   principle.      A    moderate   rate    indicates  security." 

A   well  known  authority   commenting  upon   this  publication   Bait!   it    might 


SPECULATION  AND  INVESTMENT. 

have  been  written  for  the  guidance  of  every  trustee  of  funds  in  the  United 
States,  and  continued : 

"It  is  ;i>  true  oi'  the  individual  investor  as  it  is  of  the  Equitable  Life.  The 
real  investment  fund  put  into  speculative  issues  must  ultimately  deteriorate. 
The  less  the  speculative  element,  the  greater  the  stability,  and  stability  is 
the  great  desideratum  of  investment.  This  statement  does  not  apply  to  the 
business  operations  of  business  men.  Business  itself  is  speculation.  But  the 
business  that  is  not  conducted  by  business  men,  understood  by  the  men  that 
run  it.  carefully  watched  and  guarded,  is  a  speculation  that  is  headed  straight 
for  ruin.  What  would  one  think  of  the  trustee  who  put  a  woman's  fund,  for 
instance,  into  a  commercial  enterprise  with  the  management  of  which  that 
trustee  was  not  familiar;  the  credit  of  which  was  not  beyond  all  question 
sound;  the  sole  recommendation  of  which  was  the  fact  that  profits  were  large? 

"To  put  funds  into  the  bonds  or  stocks  of  any  corporation  is  to  become 
a  partner  in  that  corporation.  No  man,  not  imbecile,  will  knowingly  become 
a  partner  with  knaves  or  incompetents  unless  he  intends  to  keep  most  careful 
watch  upon  his  partners.  Yet  thousands  of  the  intelligent  citizens  of  the 
United  States  will  each  year  blindly  buy  the  stocks  and  bonds  of  companies 
whose  managers  are  both  knaves  and  incompetent — merely  because  the  divi- 
dends look  large,  perhaps,  or  because  the  prospectus  of  the  company  is  pretty 
to  look  at,  promises  many  things,  and,  on  the  whole,  is  comforting.  To  this 
great  innocent  investment  class  it  must  come  as  a  shock  that  the  huge  'Equit- 
able' is  afraid,  actually  afraid,  to  touch  the  securities  that  are  fed  out  in 
millions  to  the  public.  The  'Equitable'  has  the  best  financial  advice  in  the 
world.  Great  financiers  and  bankers  sit  upon  its  board.  The  combined  invest- 
ment wisdom  of  Jacob  H.  Schiff,  E.  H.  Harriman,  J.  J.  Hill,  August  Belmont, 
H.  0.  Frick,  Sir  William  Van  Home  and  a  dozen  other  such,  is  at  its  call.  Yet 
the  'Equitable'  dare  not,  with  all  this  market  wisdom  at  its  command,  take  the 
bonds  and  stocks  that  are  sold  daily  into  the  small  safes  of  the  country  parson, 
the  backwoods  lawyer,  the  widow  of  the  petty  tradesman  in  New  England. 
Daily,  the  widow's  life  insurance  legacy  is  sunk  in  stocks  and  bonds  the 
'Equitable'  dare  not  buy,  because  it  feels  the  risk  is  far  too  great.  There  is 
a  grim  humor  in  this  paradox  of  the  investment  world.  It  is  to-day  as  true  as 
when  it  first  was  written: 

"  'Fools  rush  in   where  angels  fear  to  tread !'  " 


SPECULATION  AND  INVESTMENT.  223 

How  $1,500,000,000  of  Bonds  Change  Hands  Era;//   Year. 

It  should  not  be  taken  for  granted  that  because  the  New  York  Stock 
Exchange  and  some  of  the  other  exchanges  of  the  country  make  a  business  of 
creating  a  market  for  investments,  all  the  stocks  and  bonds  of  the  country 
are  sold  on  these  exchanges.  In  the  sale  of  bonds  the  greatest  factor  is  the 
group  of  banking  houses  in  Wall  street  which  have  branches  or  close  con- 
nections in  other  domestic  financial  centers  and  likewise'  in  the  great  markets 
of  Europe.  Indeed,  these  houses  do  a  business  which  often  equals  and  some- 
times even  excels  the  tremendous  stock  speculation  on  the  New  York  Stock 
Exchange,  for  bonds  representing  about  $1,500,000,000  are  marketed  through 
this  medium  almost  every  year. 

We  have  seen  that  merchants,  manufacturers  and  other  capitalists  who 
do  business  in  corporate  form  frequently  borrow  money  on  which  to  extend 
their  facilities.  This  frequently  is  done  through  issuing  bonds  secured  by 
a  mortgage  or  other  lien  on  the  property  of  the  capitalist.  In  times  when 
a  great  expansion  in  general  business  is  under  way — when  prosperity  smiles 
brightest — there  are  a  great  many  bond  issues  for  sale.  The  principal 
buyers  of  bonds  are  the  insurance  companies,  banks  and  small  investors.  Insur 
ance  companies  with  their  gross  incomes  running  in  excess  of  halt'  a  billion 
dollars  every  year  naturally  must  find  some  place  to  put  the  money  so  that 
it  will  earn  interest  for  the  policy  holders.  When  expenses  are  paid  frequently 
$200,000,000  is  available  for  such  purpose.  Of  the  banks  the  saving  institu- 
tions can  be  counted  on  to  take  up  something  like  $150,000,000  and  the  I  nisi 
companies  and  national  banks  absorb  about  the  same  amount.  The  millions  "I' 
investors,  large  and  small,  domestic  and  foreign,  take  up  the  remaining 
billion. 

Then-   are   two   principal   classes   of   bond   dealers   who   make    il    their   business 
of    transferring    these    bonds    from    the    corporations    which    issue    them    to    their 
final    lodging    place    with    the    investors.       These    are    Hie    great     national    hanks, 
trust    companies  and    private  banking  firms   which   make  up   the   principal    under 
writing     Byndicates;     and     the     private    bond     houses,     which     though     sometimes 

members  of  these  big  syndicates,  generally  dispose  of  their  bond  offerings 
through  private  correspondence  to  the  minor  yel  all  important  investing  public. 
Of  the  fir-t  clasa  we  find  such  great  institutions  as  the  National  City  Bank, 
first  National  Banlc  and  National  Bank  of  Commerce  of  \.  u  York  Cjty;  the 
Illinois  Trust  and  Savings  Hank  and  the  Firsi  National  Hank  of  Chicago  and 
similar  big   concerns.     Of  the   big   private   institutions    which    manage   greal 


gg*  SPECULATION  AND  INVESTMENT. 

financial  underwritings  there  are  a  half-dozen  principal  houses  such  as  J.  P. 
Morgan  &  Co.,  Kuhn,  Loeb  &  Co.,  Speyer  &  Co.  It  is  the  business  of  these 
firms  to  be  able  to  float  at  command  any  amount  of  bonds  and  to  be  able  to 
secure  money  to  any  fabulous  amount  almost  in  an  instant.  For  that  reason 
the  members  of  the  private  banking  firm  and  the  directors  of  some  of  the  great 
banks  are  one  and  the  same.  This  power  is  carried  even  further.  As  we  have 
shown  in  the  chapter  on  the  Insurance  Trust  members  of  the  firms  often  are 
directors  in  great  companies  which  need  to  sell  bonds  and  stocks  from  time  to 
time,  and  besides  being  thus  actual  seller  and  seller's  agent,  these  bankers 
frequently  are  on  the  board  of  directors  of  some  insurance  company  or  trust 
concern  which  in  turn  will  buy  the  securities  offered  for  sale.  Thus  they 
become  seller,  seller's  agent  and  buyer-in-trust  for  the  people  whose  savings 
may  be  deposited  with  them  for  safe  keeping. 

As  a  general  thing  these  big  private  banking  firms  each  can  dispose  of 
$100,000,000  to  $300,000,000  a  year,  and  where  the  business  of  being  both 
buver  and  seller  is  often  easily  regulated  the  profits  of  a  house  of  this  char- 
acter may  be  anywhere  from  $2,000,000  to  $8,000,000  a  year  on  this  business 
alone. 

It  is  largely  because  these  firms  have  such  great  facilities  in  connection 
with  friendly  banks  that  they  get  the  great  business  they  command.  Some- 
times they  are  expected  to  obtain  money  when  money  is  very  hard  to  get.  If 
tin  occasion  warrants  it  the  house  will  ransack  all  the  financial  world  to  get  the 
de>ired  funds.  Even  the  government  has  had  access  to  them  in  order  to  sell 
its  bonds  when  hard  times  pressed.  For  several  reasons  great  railways  and 
other  corporations  have  a  special  financial  interest  in  some  one  or  more  of 
these  banking  houses.  In  the  first  place  the  close  relationship  of  private  and 
national  banks  in  Wall  Street  and  the  interrelation  of  directors  of  these  con- 
cerns in  the  great  corporations  of  the  country  dictates  such  relationship.  For 
instance,  just  now  there  is  close  relationship  between  the  firm  of  J.  P.  Morgan 
«\  Co.  and  the  First  National  Bank  of  New  York.  We  generally  find  then 
that  this  interest,  principally  the  house  of  Morgan  &  Co.  acts  as  fiscal  agent 
tor  >uch  companies  as  it  is  most  closely  allied  with.  Mr.  Morgan  was  the 
great  genius  in  forming  the  United  States  Steel  corporation  and  he  almost 
owns  the  Southern  Railway.  Therefore,  we  find  these  companies  among  his 
closer  business  ties,  together  with  such  others  as  the  Erie,  the  New  York 
Central,  the  Hocking  Valley,  the  General  Electric  company,  the  Lake  Shore 
Road,  the  Atchison  and  Northern  Pacific.  On  the  other  hand  the  great  influ- 
ence of  the  National  City  Bank,  the  Rockefellers  and  the  Harriman  interests 


SPECULATION  AND  INVESTMENT.  225 

arc  associated  more  or  less  definitely  with  Kuhn,  Loeb  &  Co.  This  firm 
generally  acts  as  fiscal  agent  for  the  Pennsylvania  Railroad,  the  Baltimore 
&  Ohio,  the  Norfolk  &  Western,  the  Union  Pacific,  Southern  Pacific,  Illinois 
Central,  etc.  Such  roads  as  the  Rock  Island,  Mexican  Central  and  some  others 
and  several  foreign  governments  like  Cuba  and   Mexico  use  Speyer  &  Co. 

Much  of  this  sort  of  selling,  however,  is  into  smaller  bond  concern-. 
which  in  turn  sell  to  the  investor  who  keeps  his  bonds  for  good.  There  are 
hundreds  of  these  bond  houses  and  nearly  every  bank  does  a  business  of 
buying  and  selling  bonds  to  some  extent.  There  are  many  rich  people  in  the 
United  States  of  whom  the  newspaper  reading  public  never  hears.  These 
people  have  money  to  invest  and  are  eagerly  sought  out  by  retail  bond  houses. 
The  big  syndicate  houses  we  have  described  more  properly  are  in  the  wholesale 
business.  Though  the  bond  firms  may  do  a  retail  business,  they  often  handle 
very  great  transactions  both  in  single  amounts  and  in  the  aggregate.  For 
instance,  some  of  these  houses  have  list  of  investors  on  their  books  running 
from  5,000  to  25,000  names,  representing  all  localities  of  the  country  and 
even  some  foreign  countries.  One  bond  house  in  Wall  Street  has  a  list  ol 
22,000  names,  each  of  which  represents  an  average  yearly  purchase  of  $5,000 
of  bonds.  This  means  $10,000,000  business  a  year.  With  such  power  and 
ready  ability  to  place  securities  with  the  public  such  a  bond  firm  would  not  fear 
to  Bubscribe  itself  to  as  high  as  $20,000,000  of  good  municipal,  county  or  -ail- 
road  bonds,   for  it   could  find  a   market   for  them  at    a    profit    with   no   trouble. 

Of  course  the  reputation  of  a  retail  bond  dealer  is  very  important  in  bond 
transactions.  The  average  small  investor  buys  securities  because  they  are 
recommended    to   him,   not    because   he   knows   definitely   of   their   value.       For    this 

son   the  bond  house  must    he  able  t<>  advise  as  to   the  character  of  invesl 
ments    offered    for   sale.       If   these    were    to    turn    out    badly    the    customers    of   a 
firm   would   lose  nionev  and   the  firm   would   lose   its   patronage.      This   necessitates 

greal  care  and  investigation  on  the  part  of  the  bond  firm,  and  indeed,  there 
are  i,u  house,  hut  thai  can  boas!  their  customers  have  not  lost  monej  through 
investments  advised  by  them.  It  is  generally  the  "gel  rich  quick"  swindler  and 
,,,,(  (I,,,  reliable  bond  dealer  who  robs  the  public. 

The.e  bond   firms  employ  a   -real    many   salesmen,  some  of  them  as  high 
forty.     Wall  Street   alone  has  about   300  such  men.  and  Chicago,  Boston, 

St.     Louis,    San     Francisco,    Denver,    Ne*     Orleans.     Minneapolis,    SI.     Paul    and 

other  big  cities  send  out  men  over  the  country  to  both  buj  and  sell  securities. 
These  nni,  are  almost  all  experts  in  bond  values  and  some  receive  as  high  as 
$10,000  »"  $15,000  a  y<  ar  compensation. 


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CHAPTER    XVII 
MORALITY    IN    WALL    STREET. 

Great  Financiers  Are  Trustees  of  Wealth  fur  Others — Abuses  of  Sacred  Trust 
Speculating  with  "Inside  Information" — Juggling-  with  the  People's  Sav- 
ings-   Great    Power   Creates   Great    Obligations. 

In  this  day,  when  the  world  has  been  astounded  by  such  scandals  as  that  in 
the  Equitable  Life  Assurance  Society,  the  defalcation  of  several  hank  presi- 
dents, and  misdeeds  by  the  speculative  director  of  watered  or  unwatered  stock 
corporations,  one  of  the  most  pertinent  themes   for  discussion   is  that  of  the 

morality  of  Wall  Street  and  of  the  financial  community  at  large.  It  has  been 
said  that  every  man  is  a  steward  or  trustee  for  others  and  must  he  judged 
according  to  the  faithfulness  of  his  trusteeship.  Let  us  stop  to  consider  what 
this  means  today. 

We  can  scarcely  appreciate  the  enormous  size  of  trusteed  wealth  today. 
There  are  some  $10,000,000,000  deposits  in  all  the  hanks  of  the  United  States, 
aim, it  $12,000,000,000  in  capital  in  railway  corporations,  $11,000,000,000  of 
life  insurance  in  force  and  perhaps  $12,000,000,000  of  capital  in  industrial 
and  franchise  organizations.  Here,  then,  nearly  half  of  the  wealth  of  the 
whole  nation  is  shown  to  he  administered  by  a  few  trustees  for  the  benefit  of 
the  many.  This  very  fact  calls  for  a  higher  morality  and  a  stricter  sense  of 
honor   than    where   business    is   carried    on    for   and    by    an    individual.      The    man 

who  accepts  the  position  of  a  director  or  trustee  of  other  people's  propert) 
finds  himself  held  to  stricter  accountability  than  if  he  acts  solely  for  himself. 
Hi-  directorship  or  trusteeship  is  a  sacred  trust.     II.'  finds  himself  confronted 

with   t  u  o   facts  : 

first.     A   corporation   is  not   a   private  affair,  hut    a  creature  of  the   law. 

allowed    to  exist    only   by    the   law:   an   artificial    person    made   up   of   man\    clian- 

ing  individuals,  and  therefore  in  important  relation  to  tin  public  ami  Btrictlj 
accountable  to  it   for  all  acts. 

Second.     A  trustee  or  director  is  serving,  not   for  himself,  hut   for  others. 

Strictly  Bpeaking,  he  is  :i  public  servant  and  has  no  power  of  trusteeship  in 
order  to  enrich   himself. 


MORALITY  l\   WALL  STREET. 

Failure  to  recognize  Hum-  truths  is  destined  to  result  in  the  eventual  collapse 
of  the  whole  corporation  system.  It  has  been  said  with  some  accuracy  thai 
there  are  three  things  which  cause  immorality  in  corporations,  and  in  Wall 
Street  in  particular,  namely,  "the  ignorance  of  the  stockholders,  the  demoral- 
izing effect  of  collective  responsibility  and  the  feeling  of  the  director  that  he 
has  no  right  to  jeopardize  the  opportunities  of  profit  by  listening  to  scruples 
in   which   he  has   no  assurance   that   the  stockholder   will   share." 

Here  we  find  perhaps  the  principal  causes  of  business  immorality.  The 
iverage  stockholder,  generally  being  a  minor  investor  and  not  connected 
officially  with  the  corporation,  does  not  feel  shame  at  any  misdeed  done  in  the 
name  of  that  corporation,  as  he  would  if  he  shared  in  the  business  through 
ordinary  partnership.  The  stockholder  might  desire  most  heartily  to  keep  down 
Mich  abuses,  hut  he  is  kept  in  ignorance  of  the  company's  acts;  and  the 
director,  being  an  official  who  is  to  act  frequently  in  some  manner  that  may 
affect  the  market  value  of  the  stock  of  the  corporation — what  is  called  an 
••insider" — is  tempted  to  use  his  "inside"  information  in  the  speculative  market 
for  his  own  profit,  arguing  with  himself  that  he  would  do  himself  an  injustice 
not  to  use  it  and  would  do  the  stockholders  who  trust  in  him  no  good  to  turn 
from  the  temptation. 

It  is  in  the  abuses  of  sacred  trust  that  Wall  Street  finds  its  severest 
indictment.  Wall  Street  no  longer  means  simply  the  crooked,  narrow  thorough- 
far,  in  New  York  City  flanked  by  hanks  and  financial  houses,  but  the  general 
financial  and  speculative  community  of  New  York,  and  inferentially  of  all 
America.  It  is  at  this  center  that  all  great  financial  operations  find  form  or 
completion;  that  railway  and  other  corporation  directors  have  their  headquar- 
ters or  special  meetings;  that  the  biggest  market  for  stocks  and  bonds  exists, 
and  that  in  general  most  important  financing  develops.  Therefore,  in  a  great 
measure,  the  morality  of  narrow  Wall  Street  is  the  morality  of  financial 
America.  And  as  has  been  said,  it  is  in  the  violation  of  trust  for  the  sake  of 
gaining  personal  profit  that  the  worst  phase  of  business  immorality  is  seen  in 
Wall  Street. 

Considering  the  amount  of  billions  of  wealth  controlled  by  directors  and 
trustees,  the  actual  visible  defalcations,  thefts,  robberies,  etc.,  committed  are  so 
insignificant  that  Wall  Street  may  he  called,  in  that  sense,  highly  moral,  not- 
withstanding the  strictures  against  the  wickedness  of  speculation  and  gambling 
seen  in  the  stock  markets  and  other  exchanges.  This  speculation  can  he  and 
has  been  explained  on  good  ground  as  being  justified  by  more  than  one  cause. 
Speculation  in  securities,  grain,  iron,  lumber  or  what   not,  requires  a  legal  con- 


MORALITY  IX  WALL  STREET.  229 

tract,  in  which  there  shall  be  no  fraud,  and  in  which  the  parties  to  the  contract 
shall  be  competent  and  shall  give  their  consent.  In  general,  this  business  is 
transacted  with  honesty.      But  let  us  consider  some  of  the  specific  exceptions. 

In  the  first  place  there  is  a  serious  question  whether  certain  people  are 
morally  competent  to  speculate.  With  only  a  few  exceptions  it  seems  to  he  a 
truth  well  known  in  all  the  speculative  markets  that  a  broker  must  get  a  nm 
set  of  customers  every  so  often:  that  win,  as  some  lucky  one  may  for  a  time,  in 
the  long  run  the  "public"  or  "lambs,"  as  the  outside  speculators  are  called,  lose 
capital.  This  at  once  raises  the  question  of,  Who  gets  this  money?  Much  of 
it  goes  to  brokers  in  commissions  for  transacting  business  for  the  speculator; 
much  of  it  in  paying  big  interest  of  marginal  speculation  beyond  the  capital 
of  the  speculator,  but  much  of  it  goes  to  the  "professional"  or  to  the  -insider." 
The  former  is  the  man  who  makes  speculation  his  life-long  business,  judging 
of  conditions,  when  it  is  a  good  time  to  buy  and  when  to  sell.  He  accepts  the 
machinery  of  speculation  as  it  exists  and  profits  by  the  incapacity  of  the 
ignorant  and  casual  speculator,  much  the  same  as  a  shrewd  business  captain 
bests  a  small  competitor  in  a  hard  bargain. 

Hut  frequently  in  the  stock  market  history  has  shown  that  the  "ticker"  told 
in  advance  the  story  of  some  important  development  in  the  finances  of  a  cor 
poration.  for  weeks,  perhaps,  a  stock  has  advanced  in  price  with  much  mys 
tery;  and  then  suddenly  the  directors  of  the  company  announce  an  extra  or  an 
increased  dividend,  the  issue  of  new  stock  at  cheap  price,  or  the  like.  It  is  the 
infallible  inference  that  some  one  in  authority  has  -leaked."  Contrariwise,  il 
may   |)(.   thai    the   price   of    Hi''   stock    has   declined,   and    then    the    news   conies   out 

that  dividends  have  been  "passed,"  or  stopped,  or  that  the  company  confronts 
bankruptcy  or  some  similar  calamity.  Examples  of  this  sort  of  business  are 
numerous,  and  the  writer  might  detail  in  great  length  the  rise  and  fall  of  cer 
tain  stocks  where  the  "tale  of  the  ticker"  showed  plainlj  that  some  one  knew 
far  in  advance  what  would  be  the  financial  policy  of  a  corporation  and  profited 
thereby  before  the  stockholders,  who  had  all  moral  and  legal  righl  for  as 
speedy  knowledge  of  such  developments  as  any  one,  received  official  notice  of 
such  developments. 

It  has  bee,,  asked  pertinently.  How  can  a  director  morally,  acting  as  ii 
director,  buy  or  sell  the  stock  of  his  own  corporation  for  speculative  profit? 
Suppose  he  acts  with  foreknowledge  of  pending  important  developments  and 
buys  stock  in  the  company.  In  reality  h\  thus  doing  he  uses  his  "inside" 
information  to  bu)  of  a  stockholder  for  whom  he  is  trustee.  If  the  Btock 
holder  who  trusts  in  him  had  known  what  he  knew,  the  Btock  would  no!   have 


;;,.  MORALITY  IN   MALI.  STREET. 

been  sold  to  the  director.  Whatever  profit  the  director  makes  on  such  a  trans- 
act ion  virtually  belonged  to  the  former  stockholder  was  math-  in  fact  at  the 
expense  of  the  man  for  whom  the  director  had  sworn  to  act  as  trustee  in  faith 
ami  good  practice.  If,  on  the  other  hand,  the  director,  knowing  of  some  bad 
development,  sells  his  stock  out  without  making  public  this  situation,  he  becomes 
a  trustee  for  a  man  whom  he  has  defrauded  simultaneously  with  the  act  of 
becoming  trustee.  This  leads  to  the  inevitable  conclusion  that  good  morals 
cannot  permit  a  man  to  speculate  in  the  stock  of  the  company  of  which  lie  is 
director.  If  this  reasoning  is  carried  a  step  further,  it  will  be  seen  that  a 
director  has  not  the  right  secretly  to  communicate  "inside"  information  to 
others  who  can  use  the  pending  developments  for  speculative  purposes.  For, 
whether  the  speculation  be  to  buy  or  to  sell  the  stock  of  a  company,  the  action 
of  the  director  results  in  a  breach  of  trust  which  he  has  promised  to  hold 
inviolate.  And  yet  the  writer  is  personally  informed  almost  daily  of  develop- 
ments that  will  transpire  to  the  good  or  to  the  detriment  of  stock  values  and 
prices  long  in  advance  of  the  casual  stockholder. 

Obviously  here  is  one  common  cause  for  revolt  against  Wall  Street's  slack 
morals  and  against  such  methods  of  juggling  with  the  people's  savings.  As 
Thomas  F.  Woodlock,  an  authority  on  Wall  Street  affairs,  has  said  in  refer- 
ring to  this  action  by  speculative  directors:  "The  advantage  is  not  theirs  to 
use  or  to  give  away  at  their  good  pleasure.  The  use  for  personal  profit  of 
advantages  arising  from  holding  of  public  or  fiduciary  office  or  power  is  the 
i  ssence  of  all  'graft,'  whether  it  be  politics  or  whether  it  be  plain  business. 
Take  the  case,  for  example,  of  individual  directors  of  a  hank  or  a  trust  corn- 
pan  v  or  an  insurance  company  who  make  a  profit  from  underwriting  syndi- 
cates, it  being  understood  that  the  bank  or  trust  company  or  insurance  com- 
panv  is  to  purchase  some  of  the  securities  thus  underwritten.  There  is  only 
one  word  that  characterizes  the  transaction,  and  that  is  plain  'graft.'  It  makes 
no  difference  whether  the  securities  ultimately  purchased  by  the  company,  bank, 
trust  or  insurance,  are  purchased  at  a  fair  price  or  not;  the  individual  director 
i>  not  morally  competent  to  make  such  profits  and  such  profits  morally  belong 
to  the  company  because  they  attach  to  the  official  position  and  not  to  the  indi- 
vidual. If  this  reasoning  is  correct,  and  I  see  no  escape  from  the  conclusion, 
it  i-,  evident  that  in  the  broad  sense  of  the  word,  'insiders'  are  not  morally  com- 
petent to  speculate  in  securities  in  Wall  Street  for  their  own  individual  profit. 
By  reducing  the  Bduciary  relationship  represented  by  an  'insider'  to  its  simplest 
form  of  trusteeship,  namely,  that  of  one  individual  to  another,  the  case  is 
evident.     Thus,   the   moral   competence  of  a   large  section  of  the  Wall   Street 


MORALITY  IN   WALL  STREET.  231 

community  to  speculate  in  securities  for  individual   profit    is  very  decidedly   re 
stricted,  to   the  extent  that  the   Wall    Strict    community   occupies   a   fiduciary 
position  in  relation  with  the  public.     What  is  the  practice  of  Wall   Street   in 
this  respect  ? 

"I  dislike  to  bring  a  general  indictment  against  a  person  or  a  community, 
but  the  plain  fact  is  that  in  Wall  Street  speculation  by  'insiders*  for  their  own 
exclusive  personal  profit  is  the  rule.  The  proverb  that  'the  tape  tills  the 
story*  has  quite  common  use  because  of  the  generality  of  the  practice.  My 
observation  compels  me  to  the  conclusion  that  the  'insider*  who  does  not  use  his 
official  position  for  his  personal  profit  by  means  of  speculation  is  extremely 
rare.  Furthermore  the  Wall  Street  community  cynically  expects  him  to  do  mi. 
and  in  no  way  blames  him  when  he  does  it.  I  fear  no  contradiction  on  this 
point  from  any  one  possessing  even  a  limited  experience  in  the  street.  Thus 
as  regards  the  first  of  the  principles  governing  the  case  we  are  compelled  to 
the  conclusion  that,  so  far  as  the  speculative  public  is  concerned,  a  very  large 
proportion  of  people  who  speculate  are  morally  incompetent  to  do  so,  because 
they  risk  money  that  tiny  cannot  afford  to  lose,  and  so  far  as  the  Wall  Street 
community  in  particular  is  concerned  a  large  part  of  the  speculation  i>  con- 
ducted by  people  who  have  no  moral  right  to  do  so,  because  they  are  aiming 
to  derive  personal  profit  from  fiduciary  relations.  I  do  not  want  to  say  that 
the  majority  of  speculative'  transactions  are  made  by  people  who  are  morally 
incompetent  to  make  them,  but  it  is  very  evident  that  a  large  part  of  them 
are  so  made.** 


CHAPTEB    XVIII 

LYING    TO    MAKE    MONEY— HOW    WALL    STREET   THRIVES    ON 

FALSE  RUMORS. 

"Fedce"  Quotations — Gambling  on  Rain  or  Sunshine — Government  Weather 
lit  ports  Eagerly  Sought  and  Often  Perverted — How  Fortunes  are  Made 
and  Lost  on  Humors  and  Canards. 

W.u.i.  Smii  t  has  been  busy  these  many  years  trying  to  live  down  a  bad 
reputation.  Competent  judges  say  that  in  this  great  money-center  of 
America  the  old  proverb  "Honesty  is  the  best  policy"  is  the  rule  of  conduct. 
Nevertheless  there  is  an  element  in  Wall  street  that  makes  it  pay  to  lie.  This 
element  i-  made  up  of  such  speculators  or  big  moneyed  men  who  circulate 
rumors  for  the  effect  it  will  have  on  the  prices  on  the  stock  exchanges  of  the 
country. 

To  the  uninitiated  in  the  matter  of  this  feverish  business  of  hazarding 
wealth  in  order  to  gain  quick  though  doubtful  profits  it  should  be  explained 
that  the  rumor  or  canard  often  plays  an  important  part  in  speculation,  or 
rather  in  that  phase  of  speculation  which  most  nearly  resembles  gambling. 
When  prices  of  securities  are  moving  rapidly  up  or  down  on  the  stock  ex- 
change, every  speculator,  or  investor  for  that  matter,  wishes  to  know  the 
cause.  To  the  investor  who  owns  stocks  or  bonds  that  are  appreciating  in 
price  this  information  may  hi'  of  the  greatest  value.  For  if  the  higher  price, 
for  Instance,  i-  based  on  the  knowledge  or  belief  of  other  investors  that  the 
property  represented  by  the  security  is  increasing  in  value,  presumably  the 
holder  of  the  -forks  would  desire  to  retain  his  holdings  in  order  to  participate 
in  the  better  earnings  to  he  distributed  in  dividends.  On  the  other  hand,  if 
there  were  no  special  reason  why  the  stocks  should  be  advancing  save  because 
of  the  manipulation  of  speculators,  the  investor  might  desire  to  sell  out  at  this 
r  figure. 

In  like  manner,  the  speculator  desires  to  know  the  cause  of  price  fluctua- 
tion-, for  it  may  mean  an  opportunity  to  risk  his  wealth  in  an  enterprise  that 
promises  to  earn  him  new  wealth.  And  the  gambler  desires  to  know  what  is 
going  on  in  order  to  bet  on  the  probable  winning  side. 

232 


LYING   TO   MAKE   MONEY.  233 

Since  explanations  of  "booms*'  and  "flurries"  must  be  found  to  appease 
ilie  appetites  of  those  of  Wall  Street,  rumors  of  some  sort  generally  accom- 
pany such  movements  in  stocks.  Some  times  they  come  to  notice  after  a 
movement  in  prices  has  already  started;  sometimes  they  precede  the  move- 
ment and  cause  it,  and  sometimes  they  both  follow  and  accentuate  the  price 
changes.  It  is  safe  to  say  that  99  out  of  every  100  rumors  are  the  purest 
fiction. 

However  absurd  a  rumor  may  be,  if  it  is  circulated  extensively  enough  it 
always  has  some  effect  upon  the  market.  The  writer  recalls  an  incident  in  the 
stock  market  panic  of  the  summer  of  1903.  Wall  Street  was  experiencing  a 
money  pinch  and  feared  hard  times.  Too  many  hanks  and  trust  companies 
had  invested  the  people's  savings  in  the  stocks  and  bonds  of  heavily  "watered" 
corporations  and  hence  were  in  a  precarious  condition.  In  the  midst  of  a 
panic  one  day  several  banking  concerns  of  Baltimore  suspended  business. 
Then,  presumably  to  add  to  the  slaughter,  some  ••hear"  who  wanted  to  see 
stocks  go  down  still  further,  started  the  report  that  the  Northern  Trusl  Com- 
pany of  Baltimore  had  failed.  This,  on  top  of  the  other  failures,  suggested 
to  Wall  street  speculators  that  affairs  in  the  Maryland  city  were  in  a  fright- 
ful pass.  By  the  time  the  writer  telegraphed  to  Baltimore  for  particulars 
and  Learned  there  Was  no  such  hank  in  that  city  and  that  the  report  was  a  lie, 
the  damagi  had  already  been  done  and  stocks  had  been  lowered  to  the  satisfac- 
tion of  tin    "hears." 

T'sualU  it  i-,  easy  to  trace  a  rumor  that  has  been  started  for  a  purpose. 
Sometimes  the  source  of  such  a  rumor  is  not  located,  but  generally  the  falsity 
of  a  rumor  Is  made  apparent  very  quickly. 

Probably  most  lies  start  from  '"pooh"  which  are  operating  in  the  market 
to  raise  or  lower  prices  artificially.  When  this  is  the  case  the  lie  is  a  lie 
morally    but    often    is    carried    without    being    a    lie   other    than    in    action.        For 

instance,  such  a  "pool"  or  syndicate  must  employ  man}  brokers  i«>  carry  out 
its  orders  on  the  exchanges.  When  the  manager  of  such  n  "pool"  gives 
his    orders    to    a    broker    it    i-    very    easj    to  maki  nificanl  but  somewhat 

ambiguous  remark.  The  broker  repeals  the  remark,  generally  expanding  it, 
to  some  other  broker  or  customer.  With  this  start* the  rumor  may  gain  rapid 
headway.      This  entices  speculators  in  the  Rto  erally  to  buy  it   in  hopes 

that  it  will  advance  rapidly.  Before  Hie  rumor  has  got  will  under  wi\  the 
"pool"  has  begun  operations  in  the  stocl  and  this  attracts  market  attention. 
Tin-   prepares   the   public  mind   to  accept    an\    rumor   thai  In 

hum     Cases    out    of    I,  I,    a    good    dial    of    biixiii  I    by    the    rumor    .and 


j  ,|  l  )  ING   TO  MAKE  MONEY. 

when  tlus  is  accomplished  the  "pool"  has  sold  some  of  its  stock,  probably  at  a 
good   profit. 

The  strange  thing  about  rumors  and  canards  is  that  very  few  members 
of  the  stock  exchanges  believe  them  when  they  hear  them.  Yet  they  fre- 
quently speculate  on  their  influence  because  such  "tips"  frequently  have  their 
desin  d  effect. 

The  author  quoted  in  the  foregoing  chapter  on  the  morality  in  Wall  Street 
says  falsehoods  are  either  deliberate  or  suggested  or  arc  of  the  truth  sup- 
pressed. **(a)  In  the  matter  of  suggestio  falsi  the  commonest  form  is  that  of 
the  plain  lie,  as  when-  some  one  desiring  to  sell  stocks  starts  a  rumor  that  a 
dividend  is  to  be  increased  or  a  deal  of  some  kind  made  whereby  the  value  of 
a  stock  will  be  materially  enhanced,  thus  inducing  others  to  buy  the  stock  that 
he  wants  to  sell:  or  conversely  where  some  one  desiring  to  buy  the  stock  starts 
a  rumor  of  receivership  or  reduced  dividends,  thus  inducing  others  to  sell  the 
stock  he  wants  to  buy.  This  is  the  simplest  and  grossest  form  of  decep- 
tion, and  descending  from  it  in  the  scale  of  deception  may  take  innumer- 
able  forms,  all  designed  to  play  upon  the  speculative  spirit  of  others, 
inducing  them  to  buy  or  sell  as  may  be  desired.  There  is,  for  example,  the 
practice  of  'washing  sales'  by  means  of  'matched  orders,'  the  object  of  which 
i>  to  create  a  general  impression  that  a  genuine  market  exists,  and  that  the 
prices  recorded  are  genuine  prices  reflecting  real  and  bona  fide  transactions. 
A  'wash  sale'  i-  a  transaction  in  which  one  person  will  arrange  with  another  to 
buy  from  him  securities  at  a  certain  price,  thus  establishing  a  'quotation,' 
although  buyer  and  seller  are  one  and  the  same  person. 

"The  Stock  Exchange  rigidly  prohibits  such  transactions  in  that  it  will  not 
allow  it-  members  to  make  them  knowingly.  It  will  not  allow  A  to  pre-arrange 
with  B  to  buy  from  him  or  sell  to  him  the  securities  which  he  openly  offers  or 
bid-  tor  on  the  floor  of  the  Stock  Exchange.  It  forbids  these  transactions 
because  the  resulting  quotation  is,  in  common  parlance,  a  'fake  quotation,'  the 
ultimate  object  of  making  which  is  to  deceive  some  one  else  into  buying  or  sell- 
ing the  security.  Unfortunately  the " regulation  against  'wash  sales'  cannot 
possibly  and  in  practice  does  not  prevent,  for  instance,  C  from  giving  to  A 
mi1>  rs  to  sell  and  B  orders  to  buy  an  equal  quantity,  neither  A  nor  B  being 
aware  of  the  other's  orders.  A  goes  on  the  floor  and  in  good  faith  fills  his 
order,  B  in  equal  good  faith  selling  the  stock  to  him,  and  C  thus  accomplishing 
hi-  object  —  namely,  making  a  'fake  quotation'  with  intent  to  deceive  some  one 
ela  .  The  Slock  Exchange  cannot  stop  this  kind  of  thing,  because  it  cannot 
discover  where  it   i-  done.      Tlii-  latter  operation   is  sometimes  called  'manipula- 


LYING   TO  MAKE  MOXEY.  235 

Hon,'  and  to  the  extent  that  deception  is  intended  and  practiced  it  is  morally 
indefensible.  For  unless  we  are  to  hold  that  the  'end  justifies  the  means,'  a 
maxim  most  correctly  reprobated  in  theory,  but  somewhat  widely  practiced,  we 
must  hold  that  direct  deception  of  any  kind  by  the  suggestion  of  that  which 
is  false  can  never  be  right  under  any  circumstances. 

"Without  further  multiplying  instances  we  may  ask  how  does  Wall  Street 
stand  on  this  matter?  To  what  extent  is  the  lie  in  its  various  forms  a  part  of 
its  daily  activities?  To  what  extent  are  its  quotations  manipulated  with  intent 
to  deceive?  As  everybody  knows,  Wall  Streect  is  the  land  of  rumor.  To 
what  extent  is  it  guilty  in  a  moral  sense? 

"There  is  manipulation,  manipulation  with  intent  to  deceive,  and  plenty 
of  it.  Still  on  the  whole,  I  think  I  am  strictly  fair  in  saying  that  everything 
considered  Wall  Street  is  not  nearly  so  black  as  it  is  painted  in  this  respect. 
To  begin  with,  it  is  difficult  for  people  who  have  not  direct  experience  of  the 
Wall  Street  community  to  realize  to  what  extent  the  seething  mass  of  rumors 
which  constantly  fill  the  street  is  the  result  of  a  kind  of  spontaneous  generation. 
In  Wall  Street  the  speculative  imagination  is  apt  to  run  riot  on  very  little 
provocation  and  to  generate  stories  from  the  most  elementary  of  materials. 
The  'guess'  of  one  man  expressed  to  a  second  becomes  the  'believe'  of  the 
second  expressed  to  a  third,  and  when  the  third  man  comes  to  pass  the  story 
along  it  becomes  the  'I  know,'  and  none  of  the  three  really  intends  to  deceive. 
After  a  good  many  years  of  experience  as  a  newspaper  man  in  Wall  Street  I 
am  convinced  that  the  large  majority  of  the  rumors  which  get  into  circulation 
in  speculative  circles  are  horn  out  of  pure  conjecture  rather  than  a  deliberate 
attempt  at  fraud.  Unfortunately  this  is  not  always  true.  The  kind  of  varus 
that  will  be  put  into  circulation  by  people  conducting  speculative  pool  opera 
tions  and  put  into  circulation  by  a  complaisant  and  more  or  less  corrupt  'court 
circular'  press  are  plain  lies  and  constitute  the  kind  of  deception  or  fraud  thai 
morally  vitiates  a  contract.  While  there  is  nowhere  like  the  amount  of  this 
sort  of  thing  done  in  the  press  of  today  that  was  done  in  the  press  of  twenty 
yean  ago,  there   is   -.till    far  too   much;-    hut    let    us   look   .at    the  other  side  of  the 

"'The    principle   of    publicity    has    made   enormous    strides    in    Wall    Street     in 

the  last  feu  years.  Publicity  is  fatal  to  deception  as  sunlight  is  fatal  to  germs 
of  disease.     In   my   relatively   short   experience   I   have  witnessed   a   wonderful 

growth  in  Wall  street  of  a  spirit  id'  frankness,  on  the  part  of  those  who  make 

the   news,   towards   the   public   in   general.      \ol    only    is   this   the  case   in    the   mat 

ter  of  telling  the  truth,  hut  it  is  the  case  in  the  matter  <>f  telling  plenty  of  the 


/  )  ING    TO  MAKE  MONEY. 

truth.       I    am    proud    to   say    tliat    nowadays    I    find    it    safe    in    Wall    Street    to   go 

on  the  principle  thai  men  in  their  direct  statements  tell  the  truth.  I  rind  it 
safe  in  ni\  work  as  a  newspaper  man  to  believe  the  greater  part  of  what  I  am 
directly  told  l»v  people  in  official  positions.     It   is  true  that  the  'official  denial' 

is  -still  with  us.  I  am  going  to  that  in  a  moment.  Nevertheless,  speaking  from 
niv  own  experience  in  Wall  Street,  I  have  no  hesitation  in  saying,  first,  that 
nun  a-  a  ride  speak  the  truth  in  Wall  Street  in  speaking  of  that  which  they 
know,  and  second,  that  there  is  wider  dissemination  of  essential  truth  in  Wall 
Street  and  a  better  general  understanding  of  that  truth,  so  far  as  facts  and 
figures  bearing  upon  securities  are  concerned,  than  there  is  in  other  commercial 
and  industrial  communities  with  respect  to  their  characteristic  products  that 
are  bought  and  sold. 

••(1»)    A-  to  the  suppressio  vcri  form  of  deception  we  understand  it  to  mean 
concealment  by  one  party  to  a  contract  of  something  vital  concerning  the  mat- 
ter of  the  contract  which  the  other  party  has  a  right  to  know.     Of  course,  the 
principle  of  publicity  is  directly  opposed  to  this  form  of  fraud.     Twenty  years 
ago  concealment  of  essential  facts  was  a  common  form  of  deception  for  specu- 
lative profit,  or  at  all  events  very   much  more  common  than  it  now  is.     As  I 
have  already  pointed  out,  corporation  officials  in  recent  years  have  come  to  rec- 
ognize  the  legitimacy  of  the  public's  demand  for  information  with  respect  to 
corporate  affairs  and  have  freely  complied  with  it.     As  a  result,  it  is  as  a  rule 
relatively  easy  to  ascertain  the  truth  respecting  financial  developments  in  Wall 
Street    except    important    negotiations   actually   pending    which    would   be   ren- 
dered futile  by  general  knowledge  of  what  was  in  progress.     It  is  in  such  cases 
that   the  'official  denial'   is  mainly  to  be  met  with  today.      The  phrase  'official 
denial'   has  come   to   be   something  of  a  proverb   in    Wall   Street  owing  to  the 
fact  that   its  use  is  practiced  in  an  emergency.      Many  people  consider  it  to  be 
justifiable.      Within  a   few  weeks  a  leading  banker  admitted  to  me,  on  my  put- 
ting the  question  to  him  plumply,  that  if  it  were  necessary  to  prevent  me  from 
obtaining  information  which  would  prejudice  an  important  operation  which  he 
had  in  hand,  he  would  officially  deny  something  that  was  true.      His  excuse  was 
that   it   was  not   fair  that  anyone  should   be   placed   in  a  position  where  he  was 
compelled  either  to  affirm  or  deny  something  presented  to  him  in  the  form  of  a 
question.     The  argument  was  that  as  a  result  of  modern  newspaper  enterprise, 
which  has  deprived  people  of  their  just  privacy,  refusal  either  to  affirm  or  deny 
has  come  to  be  regarded  as  equivalent  to  a  confirmation  of  the  report  in  ques- 
tion.    Consequently,  from  his  point  of  view,  there  would  be  nothing  for  it  but 
to  deny  at  the  expense  of  truth. 


LY1XG   TO  MAKE  MONEY 


237 


"Of  course,  there 
can  be  no  moral  jus- 
tification for  the  'of- 
ficial denial'  in  such 
a  case,  but  there  may 
be  some  excuse  or  at 
least  there  may  be 
extenuating  circum- 
stances, and  in  prac- 
tice I  can  testify  that 
the  cases  of  false 
'official  denials'  arc 
rarer  than  they  were 
and  such  cases  as  arc 
met  grow  out  of  what 
may  fairly  be  called 
;ui  emergency.  I 
claim,  therefore,  that 
on  the  whole  in  the 
mutter  of  the  three 
principles  governing 
speculative  contracts 
Wall  Street's  stan- 
dard of  morality  is  a 
good  deal  better  than 

it    was   and    18   a   good 

deal  better  thanmany 

people    BUppOSe    it     tO 

be    and    that    ii     IS    im- 
pro\  ing  all    the    t  inn >. 
I   wish   to  insist   some 
w  hat   strongly  on  thifl 

point,  because  while 
Wall  Street  has  many 
sins  of  its  own  *(> 
answer  for,  it   is  not 

marly     so    guilty    on 

this  score  as  the  jury 
of  the  public  1"  liev<  - 
it   to  be." 


V  ~  ~  v.  ~  — 

>  -  —  i  i  so 
._•-__  ■_  -m 
fc.  w        -         ?i 


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JAMES    B.   FOBGAN, 


President  of  the  First  National  Bank,  Chicago, 
and  a  director  of  the  Equitable  Life 

Assurance    Societv. 


MARSHALL     ?IELD. 

The  Famous  Merchant   and   Financier, 


JOHN    M.    HALL, 

A   prominent   New    England    railroad   magnate. 


PAUL    MORTON, 

Secretary   of  th<-   United   States   Navy  Depart- 

tnent;    formerly   of  the  A.   T.  & 

s.    Fe    Railroad. 


CHAPTER    XIX 

WHAT'S  WHAT  IN  BUSINESS. 

A  New  Business  Dictionary — The  "Lingo"  of  Wall  Street — A  Comprehensive 
Explanation  of  All  Technical  Words  and  Phrases  Used  in  the  World  of 
Finance  and  Speculation. 

What  is  a  trust? 

The  popular  conception  of  a  trust  is  a  corporation  or  combination  so 
large  that  it  is  powerful  enough  to  compete  successfully  in  its  chosen  field. 
Mere  bigness,  however,  is  not  a  trust  in  the  proper  sense  of  the  word,  even 
though  this  use  is  general  both  in  every-day  speech  and  in  much  that  is  writ- 
ten about  such  combinations.  The  best  definition  given,  that  acknowledged 
by  Standard  Oil,  embraces  "the  intent,  power  or  tendency  to  monopolize  busi- 
ih  -s.  to  restrain  or  interfere  with  competitive  trade,  or  to  fix,  influence  or  increase 
the  price  of  commodities." 
What  is  monopoly? 

Monopoly  briefly  is  the  absorption  or  control  of  the  source  of  supply.  In 
its  strictest  sense  it  is  a  grant  from  a  government  of  an  exclusive  right  to 
carry  on  a  business  or'  traffic.  In  the  modern  sense  monopoly  suggests  the 
control  of  such  a  preponderating  proportion  of  a  market  for  any  commodity 
or  service  that  the  price  then  for  can  he  fixed  arbitrarily  and  regardless  of  a 
level  that  could  be  maintained  by  free  competition. 
How  many  kinds  of  monopolies  are  there? 

Three:      (1)      Natural,    based    on    the   control    of   some   element    of    nature 
through  the  ownership  of  laud,  such  as  coal,  water,  gold,  lumber,  etc.,  or  the 

exclusive    right    to    natural     facilities    for    transportation,    such    as    a    toll    road. 

railroad,   water-way,  etc.      ('.')      Legal,  an  exclusive  governmenl    grant    to  do 

business,    to   control    traffic,   etc.      (■'»)      Capitalistic    monopolies    (trusts),    which 
fold  pric.s  at  arbitrary  figures,  or  have  the  power  so  t<>  do.  through  enormous 
capital,  thus  <;i\in<j;  an  advantage  to  an  established  plant  over  any  new  or  pros- 
pect ive  compi  I  itor. 
What  is  a  corporation? 

A    ho.K     authorized    by    law    to    transact     business    as    an    individual    and    ha\ 

jng  perpetual  existence.      The  legal  conception  of  a  corporation  is  that,  as  a 

239 


240  WHAT'S    WHAT   IN   BUSINESS. 

ship  remains  the  same  ship  although  all  its  parts  gradually  be  renewed  by 
successive  repairs,  or  as  the  human  body  remains  the  same  body  though  it  goes 
through  frequent  physical  changes,  so  a  separate  legal  body  may  remain  the 
same  body  in  spite  of  changes  In  its  composition. 

What  are  essential  to  a  corporation? 

(1)      Natural  persons  who  are  the  incorporators. 

(',!)      Directors  or  trustees  who  have  control  of  its  affairs. 

(;>)      The  corporation  oi    artificial   person  created  by  law. 

Has  a  corporation  citizenship? 

To  the  extent  that  it  may  sue  or  he  sued  in  the  federal  courts  and  in  a 
proper  case  remove  its  case  from  a  state  to  the  United  States  court.  Othcr- 
w  i-t  tin  United  States  law  does  not  deem  a  corporation  a  citizen  of  a  state 
ami  it  follows  that  a  state  may  impose  an\  terms  on  a  foreign  corporation  as 
a  condition  of  doing  business  within  a  state.  This  condition,  however,  must 
not  interfere  with  interstate  commerce  or  rights  under  the  constitution. 
What  is  stock? 

The  rights  or  interests  of  members  of    a    corporation    in    its    assets,    legal 
privileges,  managements  and  profits. 
What  is  capital  stock? 

The  amount  fixed   by  law  to  be  paid  into  the  treasury  of  the  corporation 
for  use  in  its  business  operations. 
What  are  shares? 

'flu    division    of   the   total    capital   stock   of  a   corporation,   represented   by 
certificates   which   are  distributed   to  members  of  the  corporation  according  to 
the  amount  of  their  subscriptions. 
How  are  shares  of  stock  divided? 

In  any  amounts  desired,  the  par  value  or  full  paid  amount,  being  fixed  by 
dividing  the  number  of  shares  to  he  issued  into  the  total  amount  of  the  capital 

:k,    usually    par    valut     is    si  00.  hut  shares  for  other  sums,  as  small  as  $1 
and  in  some  cases  even  less,  arc  issued. 
Must  stock  be  issued  at  its  par  value? 

Not  always,  though  many  states  make  this  the  law. 
What  is  treasury  stock? 

res   not   -old   to   subscribers,  hut  held   in  the  treasury  of  the  corporation 
to  be  realized  upon   when  necessary  to  raise  funds. 
What  is  preferred  stock? 

That   class   of   stock    which   by   law   has  preference  in  receiving  dividends. 


WHAT'S    WHAT  IN   BUSINESS.  241 

Generally  the  amount  to  be  paid  in  dividends  on  preferred  stock  is  fixed  at  a 

certain  figure.       Alter  that  amount  has  been  paid  other  earnings  must  go  to 
the  common  stock. 
What  is  common  stock? 

That  class  of  capital  stock  which  is  not  preferred  stock. 

What  are  dividends? 

Tin-  profits  lit'  the  business  of  a  corporation  divided  among  its  stockholder-. 

What  is  "cumulative"  stock? 

That   class  of  stock,   generally   preferred,  on  which  dividends  accumulate 

perpetually,  which  charges,  in  the  event  of  any  postponement  of  payment, 
must  be  made  up  later,  before  profits  can  be  paid  on  the  common  stock.  '•Non- 
cumulative"*  preferred  stock  does  not  accumulate  this  debt.  Example:  If  an 
8  per  cent  cumulative  preferred  stock  does  not  earn  enough  to  pay  more  than 
4  per  cent  in  a  given  year,  the  deficiency  of  4  per  cent  must  be  made  up  later. 
Some  corporations  have  owed  as  high  as  10  or  50  per  cent  back  dividends 
which  had  to  be  paid   before  the  common  stock  could  receive  profits. 

Can  shares  of  stock  be  transferred? 

y(  5,   u pon   proper  endorsement  ;  and  a   great    business  of  selling  stocks   i- 

done    on    t  he    St<  el.    exchanges. 

How  are  dividends  paid? 

The  name  of  each  person  to  whom  stock  i>  issued  is  recorded  on  the 
books  of  the  company.  Such  a  record  owner  of  stock  is  termed  a  shareholder 
or  stockholder.  Dividends  are  paid  to  the  owner  on  record.  It  may  be.  and 
ol'li  n  docs  happ<  n.  that  dividends  are  paid  to  a  record  stockholder  when  some  one 
else  actualh  has  Hie  certificate  of  slock  in  bis  possession.  This  may  be  due  to 
Hi.  I.,.-,  of  Ik,  certificate  or  to  the  sale  of  the  stock  after  tin  dividend  is  due  but 
not  paid. 

What  are  securities? 

Generalh    speaking  negotiable   instruments  or  property    making  secure  the 

eiijovniini  or  .  nforceiih  nt  of  certain  rights.  Under  this  definition  comes 
note>,   checks,   stocks,   bonds,   mortgages. 

What  are  bonds? 

Bonds    are   a    special    form    of   contract    under    which    an    obligation    is    made. 

generallj    to   paj    a   certain   nun  of   money   under  specified   conditions.      The 
most    common    form  of  bond    is   a    promise   to   paj     borrowed     money     under     the 
;rit\    of  a   mortgage  upon  certain   property. 


243  Willis   WHAT  IX  BUSINESS. 

What  are  the  different  kinds  of  bonds? 

(1  )  Government.  (In  the  United  States,  federal,  municipal,  state,  county, 
school,  water,  council,  etc. ) 

(8)  Corporation  bonds,  which  arc  generally  secured  by  a  mortgage  on 
the  property  of  the  corporation,  under  which  the  bondholders  may  fore- 
close  upon   default   of  payment  of  principal   or  interest    to  satisfy    I  heir  claims. 

What  are  some  of  the  classes  of  bonds? 

There  are  all  sorts  of  bonds  and  the  different  classes  are  so  mixed  and 
complicated  as  to  be  bewildering.  Some  of  the  principal  kinds  arc:  (1)  First 
mortgage  bonds,  which  have  first  lien  on  the  property  of  the  corporation  in 
the  event  of  default;  (2)  Second  mortgage,  which  rank  after  first  mortgage; 
(S)  Collateral  trust,  which  are  secured  generally  by  the  deposit  of  stock  of 
another  corporation;  (4)  Income  bonds,  which  simply  are  a  sort  of  extra 
preferred  stock,  being  entitled  to  interest  or  other  payments  if  earned  only 
after  preceding  bonds  are  satisfied;  (5)  Prior  lien  bonds,  which  as  the  name 
suggests  are  placed  ahead  in  the  matter  of  preference  of  some  other  definite 
issue;  (6)  Convertible  bonds,  generally  a  first  mortgage  bond  which  has 
the  privilege  of  conversion  into  stock  of  the  company  at  a  certain  price; 
(7)  Underlying  bonds,  which  are  generally  first  mortgages  against  the 
property  of  a  company  which  in  turn,  through  being  the  property  of  an- 
other company,  has  its  bonds  guaranteed  by  the  parent  corporation;  (8)  De- 
bentures  which  are  of  various  sorts  below  a  first  or  second  mortgage  bond. 
Many  other  kinds  of  bonds  have  special  titles  because  of  some  peculiar  sort 
of  security  hack  of  them. 

What  is  the  distinction  between  stocks  and  bonds? 

Stocks    represenl    ownership    of    the    corporation;    bonds    represent    a    debt 

_  linst    the    company.       Stockholders    manage    the    company,    vote    to    elect 

officers,'  etc.,  and   divide  the  earnings.      Bondholders  have  lent  the  corporation 

money  and  have  taken  a  mortgage  against  its  property,  which   if  not   paid,  or 

the  interest   thereon,  will  go  to  satisfy  claims  of  the  bondholders. 

What  is  interest? 

The  value  given  in  return  for  the  use  of  other  value,  generally  a  stipulated 
percentage  in  money  on  money  lent  out. 
What  is  a  mortgage? 

An  instrument  which  provides  for  legal  measures  by  which  property  may 
be  sold  to  satisfy  the  contract  under  which  the  mortgage  was  given  and  which 
the  property  in  question  was  to  secure. 


WHAT'S   WHAT  IX  BUSINESS.  2-t3 

What  is  foreclosure? 

The  process  by  which  property  under  mortgage  is  seized  and  sold  in 
order  to  raise  funds  to  pay  a  contracted  debt  or  forfeit. 

What  forms  are  bonds  issued  in? 

Usually  in  amounts  of  $1,000  each,  although  they  are  sometimes  issued 
as  low  as  $100  or  $500. 

What  are  registered  bonds? 

Those  whose  interest  is  payable  only  to  bondholders  on  record  on  the  books 
of  the  corporation. 

What  are  coupon  bonds? 

Those  bonds  which  are  made  out  with  small  tickets  or  coupons  attached 
and  whose  interest  is  payable  to  the  bearer  who  presents  these  coupons. 
From  this  has  arisen  the  phrase  "coupon  cutting,"  suggesting  riches  by  rea- 
son of  clipping  off  the  coupons  to  present  for  payment  when  due.  These  may 
be   payable  at   a  bank  or  at   the  office  of  the  corporation. 

What  security  is  back  of  government  bonds? 

Often  none,  but  the  confidence  of  the  people,  for  a  state  or  the  federal 
government  cannot  be  sued.  Several  states  have  defaulted  on  bonds.  In  minor 
subdivisions,  such  as  cities,  school  boards,  etc.,  the  credit  of  the  issuing  body 
is  preserved  by  Limiting  the  amount  of  bonds  to  be  issued  under  law  accord- 
ing  to   the   amount    of   taxes   collected. 

What  is  a  stock  exchange? 

A    market    place  when-  investments  are  boughl   and  sold.      In  Vienna  and 
Berlin  Buch  a  market  !s  called  a  boerse;  in  Paris,  St.  Petersburg  and  numerous 
other  foreign  cities  a  bourse. 
How  are  investments  bought  and  sold  on  the  stock  exchange? 

By  the  transfer  of  the  certificates  of  stocks  or  bonds  for  a  consideration 
from    a   stockholder  or   bondholder   to   a    purchaser,   who   Hun    becomes    Hi.     slock 

holder  or  bondholder.  Only  members  of  the  slock  exchanges,  which  are 
private  corporations  generally,  have  the  right  to  do  business  mi  the  exchanges. 
Their  business  i-  generally  thai  of  agents  to  bin  or  sell  investment  certificates 
for  customers.      For  this  they  charge  ;i  commission     generally   our  eighth  of 

one   per  ci  nl    for   each    I  PS  ns.ict  ion. 

What  is  a  broker? 

In  this  country  a  broker  is  anj  one  \\h<>  transacts  business  for  another 
for  "brokerage"  or  commission;  but    generally  speaking  it    pertains  to  mem- 


£4  i  li  ////  'S    M  //./  T   IX   BUSINESS. 

bers  of  boards  of  trade  or  stock  exchanges,  who  do  business  on  such  boards  or 
exchanges  for  the  public. 
What  is  a  board  of  trade? 

A   board  of  trade  is  very  much  like  a  stock  exchange;  a  private  corpora 
tion  of   limited   membership   which  constitutes  a  markcl    place   for  the  selling 
of    inaiix    commodities,    generally    produce,    such    as   grain,    hay,   cotton,    hog 
products,  coffee,  butter,  eggs,  etc. 

What  is  speculation? 

In  its  broadest  sense  speculation  is  the  taking  of  any  risk  in  business  in 
the  belief  that  embracing  a  certain  opportunity  will  return  good  profits.  A 
man  who  buys  up  a  Large  tract  of  timber  land,  believing  that  in  a  number  of 
years  lumber  will  he  scarce  and  that  he  can  cut  his  timber  to  a  good  advan- 
tage, is  a  speculator.  The  same  i>  true  of  a  man  who,  knowing  that  a  rail- 
way will  come  through  a  certain  section  of  the  country,  buys  up  a  tract 
of  land  in  the  belief  that  when  the  railway  has  been  built  it  will  enhance  the 
value  of  the  ground  he  has  purchased.  Generally,  however,  the  public  when 
it  speaks  of  speculation  refers  to  buying  or  selling  of  stocks  or  bonds  or 
grain,  provisions,  etc..  in  the  hope  that  changes  in  prices  will  bring  profit. 
In  this  kind  of  speculation  the  stock  exchanges  and  boards  of  trade  lend 
themselves  mosl  freely  because  of  their  highly  organized  machinery  for 
trade. 

What  are  futures'? 

Futures  are  contracts  of  any  description,  but  generally  those  on  the 
board-  and  exchanges,  which  call  for  the  sale  or  delivery  of  certain  described 
property   at    a   given   time,   place  and    price   in   the   future. 

What  are  margins? 

Margins  in  the  technical  sense  are  deposits  of  money  or  securities  of 
wealth  which  are  part  purchase  money  of  a  contract  on  an  exchange  or 
board  transaction  and  which  are  guaranty  of  good  faith  in  the  transaction. 
Generally,  though  not  always,  a  margin  is  from  5  to  10  per  cent  of  the 
amount  of  the  consideration  in  the  contract.  Property  purchased  on  margin 
must  be  paid  for  by  some  one  acting  as  broker  or  agent;  in  that  case  the 
differ,  tie.  between  the  amount  of  margin  and  the  purchase  or  sale  price  is 
practically  a  mortgage  on  the  property  bought  or  sold.  If  the  property 
changes  in  price  enough  to  threaten  the  safety  of  the  money  the  broker  has 
advanced,  he  calls  for  further  margins  from  the  customer.  In  the  event 
of  default  or  refusal  to  pay.  the  broker  completes  the  original  transaction  by 


WHAT'S    WHAT  IN   BUSINESS.  245 

selling  or  buying  the  property   in  order    to    reimburse    himself.        If    there    is 
any  balance  left   in  margins,  that   goes  back  to  the  customer,  just    the  same  as 
in  the  foreclosure  of  a  mortgage.      If  there  is  a   deficit  the  customer  is  legalh 
liable,  though  often   it    cannot    be  collected. 
How  can  a  speculator  sell  something  he  does  not  own? 

Any  person  can  make  a  contract  to  do  a  certain  thing  at  a  future  time, 
such  as  to  deliver  steel  rails  to  build  a  railroad,  brick  to  build  a  house, 
coal  to  burn  next  winter,  etc.  So  may  one  contract  to  deliver  thousands  of 
bushels  of  wheat  next  year.  Warehouses  are  full  of  grain  and  the  con- 
tractor for  future  delivery  knows  he  can  buy  warehouse  receipts  for  grain  thus 
stored  at  any  time  by  paying  the  current  market  price.  Hence  he  may  make 
a  contract  to  deliver  wheal,  corn,  oats,  cotton,  coffee,  pig  iron,  steel,  or  stock 
or  bonds,  though  he  does  not  own  any,  for,  provided  he  does  not  have  the 
commodity  he  sells  when  the  contract  falls  due,  he  can  purchase  the  when 
withal  to  fulfill  his  contract   in  the  open  market   at   that  time. 

Why  are  transactions  of  this  sort  made? 

Largely  for  speculation,  but  also  largely  to  insure  the  contractor  against 
loss.  Example:  If  a  fanner  is  raising  a  crop  of  wheat  and  he  has  reason 
to  beHeve  he  will  have  a  big  crop  (which  ordinarily  will  bring  low  prices)  and 
current  prices  for  contracts  due  at  the  time  when  his  crop  can  be  harvest,, 1  are 
high,  he  wants  io  sell  at  a  good  advantage.  Therefore  he  makes  a  contract  for 
future  delivery.  If  his  crop  matures  he  delivers  the  wheat  and  secures  his  price. 
If    it    fails,    he    has    to    buy    from    those    who    have    wheat,    enough    to    fulfil]    his 

cont  ract. 

What  is  a  bull? 

In  speculative  terms  a  ••hull"  is  one  who  believes  conditions  in  the  market  of 
an\  commodity  or  security  warrant  higher  prices.  If  he  is  active  in  the  market 
his  efforts  are  to  advance  prices,  so  that  later  he  may  sell  his  holdings  or  contracts 
at   a   profit. 

What  is  a  bear? 

A  "bear"  in  a  speculative  sense  is  the  term    applied    to    a    speculator    who 
believes  conditions  warrant    falling  prices.     Therefore  he  speculates  to  depress 
prices  in  order  to  secure  profits  by   selling  something  he  does  not   possess  with 
the  expectation  of  being  able  to  buj   in  the  ope,,  market  at  low   price,  the  com 
modi l  v  with  which  t.»  till  his  future  contrad  wld  at  a  higher  level, 

What  is  a  corner? 

I,,  .,  supposition  ncr"  i^  the  state  of  a  market  when  a   speculative 


246 


WHAT'S    WHAT  IS   BUSINESS. 


party  has  bought  up  contracts  for  delivery  of  the  entire  visible  supply  of  a  com- 
modity, or  has  all  the  actual  supply  of  the  commodity  in  its  possession.  Actu- 
ally there  are  few  "corners"  save  in  property  thai  is  very  limited  in  extent. 
The  purpose  of  a  "corner"  in  speculation  is  to  acquire  this  control  of  certain 
property  and  create  a  demand  in  excess  of  this  supply;  then  the  price  of  the 
amount  controlled  can  be  raised  to  an  arbitrary  and  even  highly  fictitious  level, 
at  which  the  speculators  sell  to  the  consumers.  In  creating  such  a  condition 
speculators  generally  rely  upon  other  speculators  making  contracts  to  deliver 
something  they  do  not  possess,  and  then  force  such  a  seller  to  settle  his  contract 
at  high  prices  or  he  in  default.  "Corners"  are  the  dread  of  exchanges  and  boards 
of  trade  and  such  a  violent  dislike  to  such  speculative  tactics  has  arisen  that  fre- 
quently such  deals  are  taken  to  court  rather  than  to  submit  to  money  bleeding. 

What  is  long? 

When  a  speculator  is  "long"  of  stocks  or  grains  or  the  like  he  has  made  a 
purchasing  contract  and  is  the  legal  owner  of  such  property.  Generally  this 
term  is  used  to  indicate  purchases  on  marginal  accounts  and  not  property  owned 
outright  on  which  there  is  no  obligation  outstanding. 

What  is  short? 

To  be  "short*"  of  stocks  or  grain  or  other  speculative  property  indicates  that 
the  speculator  in  question  has  made  a  contract  to  deliver  the  property  at  a  cer- 
tain date  when  he  does  not  possess  such  property.  In  other  words  he  has  sold 
something  which  he  has  not. 

What  is  covering? 

A  speculator  "covers"  when  he  buys  in  the  property  with  which  he  fulfills  a 
"short"  contract. 

What  is  liquidation? 

Liquidation  is  turning  property  into  liquid  or  cash  assets:  the  closing  up  of 
a  business  deal.  When  liquidation  is  said  to  be  in  process  in  a  speculative  mar- 
ket "longs"  are  selling  out  their  property.  "Realizing"  is  another  term  that 
means  the  same  thing,  though  "realizing"  generally  suggests  simply  selling  out 
something  in  which  the  speculator  has  made  a  good  profit  which  he  is  willing  to 
take,  and  "liquidation"  suggests  selling  under  necessity  to  prevent  loss,  or  the 
like. 

What  is  stop  loss? 

When   a   broker   i-*  transacting  speculative  business   for  a  customer  on   mar- 
.1  account  and  margins  are  running  out — that  is  the  market  price  is  going 

contrary  to  tin    speculative  contract  and  a  loss  seems  imminent — more  margins 


WHAT'S    WHAT  IX   BUSINESS.  o-il 

may  be  called  for.  If  the  further  margins  are  not  forthcoming,  the  broker 
is  empowered  to  close  out  the  contract  in  the  market  at  the  best  advantage  pos- 
sible.     Generally  such  an  order  placed  in  the  market  is  called  a  "stop''  order 

that  is,  it  is  intended  to  prevent  any  further  loss.  A  "stop  loss"  order,  how- 
ever, may  be  put  in  by  the  speculator  himself  to  save  himself  against  loss  beyond 
a  curtain  point.  A  "stop"  order  even  may  be  put  in  the  market  when  there  is 
a  good  profit  in  a  transaction,  so  that  if  the  price  begins  to  go  contrary  to  the 
deal  all  the  profits  will  not  be  wiped  out.  In  "stop"  orders  a  specific  price  is 
named  at  which  to  "stop"  the  deal,  but  if  the  price  continues  to  go  against  the 
deal  before  all  the  order  is  closed  out  the  customer  must  stand  the  loss.  In  a 
bad  market  it  is  not  uncommon  to  see  price  of  a  stock  fall  $10  a  share  when  the 
stock  is  being  sold  on  a  "stop  loss"  order. 

What  is  a  pool? 

A  pool  is  an  association  of  men  or  corporations,  bound  by  some  understand- 
ing or  agreement,  to  act  in  concert  in  a  business  enterprise  generally  for  tin 
Bake  of  profits,  which  usually  are  divided  proportionately  among  them.  In 
railway  traffic  a  pool  is  a  number  of  companies  which  may  agree  to  maintain 
certain  freight  rates  in  a  given  territory,  each  road  to  share  a  certain  amount 
of  the  returns.  In  iron  and  steel  products  there  are  pools  which  agree  to  main- 
tain prices  at  a  given  level;  sometimes  they  agree  as  to  the  amount  of  tonnage 
each  member  of  the  pool  is  to  receive.  In  speculation  a  poo]  is  made  up  of  a 
number  of  speculators,  banks  perhaps  included,  which  may  buy,  say,  a  given 
amount  of  stock  of  a  corporation  for  the  purpose  of  advancing  the  price.  In 
manipulation  or  otherwise,  and  afterwards  sell  out  and  divide  the  profits. 
What  is  a  syndicate? 

A  syndicate  in  the  speculative  sense  is  a  little  different  from  a  pool.  Usually 
it  Indicates  great  importance  and  magnitude.  The  term  is  most  frequently 
used  in  connection  with  underwriting  the  securities  of  a  company.  The  pur 
pose  of  Mich  a  syndicate  or  pool  is  to  agree  to  underwrite  the  securities  at  :i 
given  price  and  to  sell  them  to  the  public.     Such  a  syndicate  usually  gets  .ill 

tin     stocks  or   bonds  of   the  corporation    that    are   to  be   -old   and    in   a    ua\    is   the 

company's  official   representative. 

What  is  underwriting? 

When  a  corporation  needs  to  raise  money  it  usually  does  so  by  selling  stocks 
or  bonds.  Bankers  and  brokers  who  arc  in  the  business  of  marketing  securities 
•  '■in  sell  these  stocks  or  bonds  to  the  besi  advantage.  Therefore  the  corporation 
agrees  to  turn  over  to  a  syndicate  the  securities  t<>  1"    Bold  ;it  a  certain  price. 


:is  WHAT'S    WHAT   IX   BUSINESS. 

This  is  called  underwriting.  The  syndicate  sometimes  is  made  up  of  many 
members  \\  lu>  agree  to  turn  over  to  the  corporal  ion  certain  amounts  of  cash 
for  the  stocks  or  bonds  as  called  upon  to  do  so  by  the  corporation.  Then  the 
syndicate,  which  i^  managed  by  sonic  big  bond,  stock  or  banking  house,  markets 
the  securities  and  divides  the  profits,  or  it'  the  venture  is  unprofitable,  divides 
the  loss. 

What  is  an  assessment? 

When  a  syndicate  or  company  needs  funds  which  it  lias  a  right  to  call  from 
members  or  stockholders,  such  a  call  for  money  is  termed  an  assessment. 

What  is  a  company  reorganization? 

Frequently  corporations  find  themselves  in  danger  of  bankruptcy  because 
earnings  arc  not  great  enough  to  pay  such  expenses  as  interest  on  the  bonded 
indebtedness,  or  the  like.  When  this  is  the  case  there  is  usually  some  attempt 
at  preventing  bankruptcy.  The  first  thing  needed  is  money  to  place  in  the 
treasury  of  tin-  company.  If  the  prospects  of  the  company  would  be  improved 
enough  more  by  advancing  such  cash  to  tempt  financiers  to  supply  the  needed 
funds  a  reorganization  of  the  company's  finances  is  usually  undertaken.  Often 
this  process  includes  inducing  the  capital  stock  of  the  company  already  exist- 
ing, or  perhaps  wiping  it  out  altogether.  Then  certain  securities  may  be  issued 
to  those  men  who  will  advance  money  to  keep  the  corporation  in  working  order. 
Such  a  reduction  of  stock  or  bonds  usually  is  called  "scaling  down"  and  the 
money  if  raised  by  order  of,  say  a  majority  of  the  stockholders,  is  found  by 
ssing"  the  stock. 

What  is  a  merger? 

A  merger  in  the  present-day  sense  of  the  word  is  the  joining  of  two  or  more 
companies,  or  business  concerns,  to  do  business  under  one  head.  Usually  this 
i>  applied  to  the  junction  of  corporations. 

What  is  a  holding  company? 

When  government  regulation  declared  against  pools  or  agreements  between 
certain  concerns  in  the  same  industry  working  "in  restraint  of  trade"1-  -in  short, 
ruled  against  trusts — corporation  lawyers  discovered  a  method  of  bringing 
these  concerns  together  legally  by  incorporating  a  company  which  should  buy 
up  at  least  a  majority  of  the  stocks  of  the  corporations  which  desired  to  work 
_  -her.  This  i->  called  a  holding  corporation.  Its  business  is  to  collect  the 
profits  from  the  earnings  of  the  other  corporations  it  owns  through  dividend 
payment-  and  to  pay  dividends  from  funds  thus  collected  out  to  its  own  stock- 
holder-.     The   other  companies  are  called  "underlying"  corporations.     They  are 


WHAT'S    WHAT  IN   BUSINESS.  249 

supposed  to  manage  their  own  business,  hut  the  managers  of  the  holding  com- 
pany really  exert  a  great  influence  on  this  business,  because,  being  in  control, 
tliej  can  appoint  managers  to  do  their  bidding.  Legally  an  "underlying" 
company  is  separate  from  the  holding  company. 

What  is  a  gentleman's  agreement? 

A  compact  between  railway  managers  or  similar  corporation  chiefs  not   to 

cut  rates  or  to  carry  on  wasteful  competition. 
What  is  a  community  of  interest? 

The  method  of  harmonizing  competing  interests,  especially  in  railway  bus- 
iness,  whereby  perhaps  directors  of  several  concerns  will  join  the  directory  of  our 
common  company  and  through  that  company  carry  out  agreements  to  prevent 
serious  competition.  The  Union  Pacific  railway  company  has  been  a  remark- 
able example  of  such  an  alliance;  at  one  time  Ilarriman,  Rockefeller,  Gould 
and  Vanderbilt  interests  were  represented  on  tins  hoard.  One  method  of  carry- 
ing out  practical  communities  of  interests  is  an  exchange  of  dividends,  which 
makes  all  parties  conserve  the  common  interest   of  the  community. 

What  is  a  lamb? 

In  the  vernacular  of  speculators,  a  lamb  is  one  who  ventures  to  speculate 
for  the  first  time  or  who  is  possessed  of  so  little  information  that  he  is  likely  I" 
become  victimized   by  unscrupulous  men.     A  lamb  is  "sheared"  when. he  loses 
his  money. 
What  is  kite-flying? 

Extending  one's  credit  in  business  to  a  very  dangerous  point.  This  often 
suggests  illegal  measures,  such  a-  issuing  fictitious  checks  or  the  like. 

What  is  a  blind  pool? 

In  speculative  terms,  this  i-  .1  pool,  all  the  members  of  which  are  ignorant 
of  its  operations,  except   the  pool  manager. 

What  are  privileges? 

Options  bough!   or  sold   in  speculative  markets  requiring  or  granting  the 
privilege  of  accepting  or  delivering  a  certain  commodity  within  h  given  period 
,ii  .1  stipulated  price 
What  is  a  put? 

A  privilege  to  deliver  on  a  cohtrad  within  a  certain  period  at  a  given  price. 
pOT  instance:  if  a  speculator  has  boughi  a  "put"  tor  100  Bhares  of  United 
Staler  St..l  ,„■,  f,  rred  at  par  good  for  thirl  v  days,  he  has  an  option  to 
deliver  these  shares  a1  $100  each  any  time'  before  the  thirty  days  expire.  It 
the  price  of  Steel   preferred   falls  to  95  while  he    has  such  a   privilege  he  can 


WIIATS   WHAT  IN  BUSINESS. 

make  the  profit  between  these  prices.  Often  one  who  has  cither  an  invest 
men!  or  a  speculation  on  the  buying  side  of  the  stock  market  will  buy  "puts1' 
at  a  nominal  expense  in  order  to  protect  himself  against  a  falling  in  prices. 
The  seller  of  a  "put"  on  a  stock  or  other  speculative  commodity  evidently  be- 
lieves  in  the  value  of  the  commodity  at  the  price  at  which  it  may  be  "put" 
to  him. 
What  is  a  call? 

A  call  is  almost  the  reverse  of  a  put.  That  is,  the  buyer  of  a  call  has  the 
privilege  of  calling  upon  the  seller  to  deliver  the  commodity  stipulated  within 
the  given  time  and  at  the  price  agreed  upon.  In  this  case,  if  the  market  price 
has  advanced,  the  holder  of  a  call  is  privileged  to  demand  delivery  of  the  com- 
moditv  ai  the  lower  price  and  of  course  he  could  sell  it  at  once  at  a  profit  in 
the  open  market. 

What  is  a  spread? 

This  sort  of  privilege  is  an  option  by  which  the  holder  either  can  call  in  the 
stocks,  grain  or  the  like  at  one  figure  or  put  it  out  at  another.  All  these  forms 
of  contracts  mentioned  as  privileges  are  virtual  bets  on  the  market  price,  but 
they  also  serve  as  a  sort  of  insurance  against  losses  in  heavy  obligations  by  the 
man  who  is  in  the  market  all  the  time.  The  seller  of  privileges  makes,  his 
profits  when  the  market  fails  to  move  against  the  privileges  he  has  put  out. 

What  is  a  capitalist? 

In  the  narrowest  sense,  a  capitalist  is  one  who  deals  in  cash  or  investments 
of  a  character  that  suggests  the  man  has  retired  from  business.  More  broadly 
speaking,  he  is  the  one  who  furnishes  the  means — such  as  working  capital, 
tools,  fixed  capita]  or  machinery,  etc. — which  when  used  by  labor  produces  any 
wealth. 

What  is  labor? 

This  term  in  its  narrowest  sense  means  the  output  of  physical  effort  to  pro- 
duce  something.  In  a  broader  sense,  however,  labor  is  the  expenditure  of  any 
sort  of  energy  to  produce  something.  This  may  be  physical  or  mental  or  both. 
In  present  day  discussion  of  labor  and  capital  there  is  frequent  reference  to  the 
managing  director.  This  is  the  representative  generally  of  the  capitalist  who 
has  his  money  invested  in  an  enterprise.  He  also  is  a  laborer  in  the  sense  that 
he  is  the  active  head  or  leading  executive  who  guides  the  workmen  in  their 
efforts  for  production.  Often  the  managing  director  is  interested  financially 
in  the  business.      He  may  even  be  the  capitalist  and  head  workman  combined. 


WHAT'S  WHAT  IX  BUSINESS.  251 

What  is  manipulation? 

Generally  this  is  a  speculative  term  meaning  artificially  changing  the  prices 
of  stocks,  grains  or  other  commodities  for  the  purpose  of  attracting  other 
speculators  to  speculate  on  what  appears  to  be  developing  in  the  market,  hut 
which  generally  is  otherwise.  Methods  of  manipulation  are  various.  A 
"rigged"  market  suggests  manipulation  so  flagrant  that  any  one  can  readily 
discern  it.  '"Washed  sales"  are  fictitious  sales  made  between  the  principal  .and 
his  broker,  or  brokers,  for  the  purpose  of  establishing  a  false  but  official  price. 
A  "matched  order"  is  a  similar  device  of  manipulation  where  an  order  to  buy  a 
certain  commodity  is  put  in  at  the  same  time  that  an  order  is  put  in  to  sell  by 
tin    same  person. 

What  is  a  bucket-shop? 

A  bucket-shop  is  an  establishment  got  up  to  imitate  a  reputable  broker's 
office.  All  the  devices  and  machinery  of  regular  investment  or  speculation 
seem  to  be  present,  but  in  reality  the  bucket-shop  is  got  up  solely  to  gamble 
with.  The  keeper  of  the  place  almost  never  is  a  member  of  the  established 
exchanges.  The  salient  feature  of  bucket-shop  methods  is  that  when  an  order 
is  put  in  such  a  place  to  buy  or  to  sell  something  the  order  is  never  executed. 
If  the  trade  is  profitable  for  the  customer  the  bucket-shop  itself  pays  the  loss 
until  the  loss  becomes  large;  then  the  concern  goes  into  bankruptcy.  If,  on 
the  other  hand,  the  imitation  market  transaction  is  a  losing  one  for  the  cus 
Joiner  of  such  a  dive,  the  bucket-shop  keeper  rakes  in  the  profits.  One  of  the 
features  which  attracts  people  to  these  gambling  places  Is  the  fad  thai  this 
so-called  "speculation"  can  hi'  done  in  very  small  amounts.  Hut  this  feature 
is  one  which  reaps  golden  harvests  for  the  crook.  For  small  deposits  of  cash 
mean    small    margins.       If    small    margins    are    put    up    they    will    he    the    more 

readily  wiped  out  by  the  most  trifling  fluctuation  in  prices.     Winn  there  is   in 
active  advancing  market    in  stocks  many   ignorant   or  innocent    people  flock   In 

these  bucket   shops.      Oddly   enough,   it    is   in   such  a    time  that    manv    hucket   shops 

fail,  for  the  reason  that  the  public  always  prefers  to  buy  rather  than  to  Bell  in 

Speculation,    and    if    the    public    strikes    the    bull    movements    in    the    market    cor 
reetlv   the  bucket   shop  must    suspend   to  save   itself. 

What  is  a  partnership? 

That  relation  resulting  from  an  agrcemenl  between  two  or  more  competenl 
p<  rsons  to  join  forces  of  capital,  ability,  or  labor,  or  all.  m  some  enterprise  and 
to  divide  the  profits.  This  is  the  same  thing  as  ;i  copartnership.  Sometimes 
the  partners  are  referred   to  as  the  "linn"  or  the  "hou 


25S  WHAT'S  WHAT  L\  BUSINESS. 

What  is  b  limited  partnership? 

\   special  sorl   of  agreement   under  special  laws  of  certain  states  whereby, 
for  reason  of  the  investment  of  a  less  sum  than  general  partners,  the  special  <>r 
limited  partner  is  liable  only  for  a  stipulated  amount  of  debts;  whereas  in  a 
genera]  partnership  each  member  of  the  firm  is  liable  for  all  the  debts. 
What  are  the  liabilities  of  a  corporation? 

Under  the  common  law  the  members  of  a  private  corporation  were  not  liable 
for  corporate  debts  or  obligations.  In  case  of  bankruptcy  they  would  lose  all 
their  investment  in  the  stock.  This  holds  generally  true  now,  save  where  special 
charters  are  granted  which  make  stockholders  individually  liable  for  all  debts 
of  the  corporation.  Usually,  however,  the  stockholder  is  liable  simply  for  an 
amount  equal  to  his  stock.  This  particularly  is  true  of  national  banks,  where 
if  a  stockholder  owns  $1,000  worth  of  stock  and  the  bank  fails,  the  stock- 
holder is  liable  to  the  extent  of  another  $1,000. 
What  is  the  curb? 

This  is  a  term  used  to  indicate  a  place  where  speculative  trading  is  done 
other  than  on  a  regular  exchange  or  board  of  trade.  Apparently  the  term 
arose  through  the  making  of  transactions  on  the  street  curb  near  the  exchange. 
In  New  York  the  curb  market  is  actually  in  the  middle  of  Broad  Street,  where, 
rain  or  shine,  brokers  fill  orders  without  cover.  In  Chicago  the  curb  is  any 
place  off  the  exchanges  where  bona  fide  transactions  are  made. 

What  were  the  first  banks? 

The  first  banking  institution  of  modern  times  was  the  Bank  of  Venice, 
organized  in  11 57*  and  made  up  of  a  number  of  wealthy  men  of  Venice  who 
for  lending  money  to  the  government  were  allowed  to  do  a  banking  business. 
It  went  out  of  business  in  1808.  The  Bank  of  Amsterdam  was  a  model  for 
many  modern  hanks:  it  was  established  in  1609  and  failed  in  1790.  The  great 
Bank  of  England,  the  greatest  in  the  world,  was  established  in  1694.  It  grew 
out  of  the  necessities  of  the  English  government  to  raise  £1,200,000.  By  fur- 
nishing  this  sum  the  incorporators  were  allowed  to  issue  notes.  The  Bank  of 
France  was  organized  in  1800.  The  Imperial  Bank  of  Germany  was  estab- 
lished in  187-"),  but  it  had  done  business  as  the  Bank  of  Prussia  as  early  as 
1765.  The  first  savings  bank  was  established  by  the  Reverend  Henry  Duncan 
at  Rothwell,  Scotland,  as  the  Savings  and  Friendly  Society.  The  Bank  of 
North  America  was  established  Dec.  31,  1781,  by  the  Continental  Congress, 
and  the  several  states  were  forbidden  to  establish  a  rival  during  the  Revolu- 
tionary War.     Tin    first  bank  of  the  United  States  was  incorporated  at  Phila- 


WHAT'S  WHAT  IX  BUSINESS. 


25J3 


delphia  in  1791  and  it  was  the  cause  of  a  great  deal  of  financial  and  political 
discord.  Application  for  a  renewal  of  its  charter  in  1811,  in  spite  of  its  good 
services  to  the  government,  was  refused.  The  second  bank  of  the  United  States 
was  organized  in  1817  for  the  principal  purpose  of  aiding  the  government  in 
raising  money  without  charge.  This  bank  was  finally  put  out  of  business  by 
1 'resident  Jackson's  vetoing  its  extension  of  charter,  and  the  stockholders  lost 
|28,000,000  by  its  expiration. 


THE   LABGEST    AND    BEST    APPOINTED    RETAIL    STORE    IN   THE    WORLD 

All    three  buildings    In    the  photograph    are   th<  ill    Pl«U    ■ 

igo.     The   magnitude  of   the   buildings,   the   volume   of  1  iui'iitl> 

.hi   idea   of   thi                     >f  <  mploj  e     i  equlred   to  '  rom    the 

i.i.  i    thai   the                                                            n  entire  ell  y   block   on  6 

treet,    hall    a    block    on    Randolph    street    and    thi  mount    ol    space   on 
li     :i  venue. 


BARON   ROTHSCHILD,  LORD    NATHAN    ROTHSCHILD, 

i   the  leading  financiers  of  the  world  and      Head    of    the   English  ^branch   of^the   famous 
of  the  banking  firm  of  N.  M. 
Rothschild  &  Sons. 


Rothschild    banking  firm. 


CLAUS    SPEECKLES. 

Multi-millionaire    Sugar    Refiner. 


HENRY     O.     HAVEMEYER, 
Of    American    Sugar    Refining    Co.    fame. 


CHAPTER   XX 
THE  SENATE  OF  AMERICAN  FINANCE. 

The   Directory   of  Directors— Extreme   Concentration   of   Corporate   Organiza- 
tions—Ninety Men  Control  the  Purse  Strings  of  the  Country — Fifty-seven 

Members  of  the  Money  Senate — Abuses  in  the  Directory  System. 

Wi.  have  already  seen  how  twenty-three  men  in  the  National  City  Bank  board 
of  directors  represent  interests  that  control  about  one-tenth  of  the  wealth  of 
all  the  United  States.  We  have  seen  how  Standard  Oil  influences  have  domi- 
nated billions,  and  how  the  interlacing  of  the  powers  hack  of  the  greal  insur- 
ance and  railway  organizations,  while  competing  with  each  other,  arc  friendly 
enough  to  mass  together  for  common  interest  and  protection  when  the  need 
arises.  It  still  remains,  however,  to  link  all  these  main  influences  of  finance, 
commerce  and  industry  which  commonly  are  termed  trusts  into  one  big  family 
in  order  to  show  to  uh.it  position  the  tendency  of  extreme  concentration  has 
brought   the  wealth  of  the   United   States. 

In  the  principal  financial  centers  of  the  country  one  can  find  a  volume 
called  the  "Directory  of  Directors."  That  of  New  York  City  is  the  largesl 
because  the  greatest  financial  interests  of  the  country  center  there.  In  this 
hook  will  he  found  a  list  of  all  the  men  who  occupy  positions  upon  the  hoard 
of   directors   of   any   corporation    in    that    cit\.       A    short    perusal    of   this    volume 

will  show  some  marvelous  things,  among  others  that  there  is  a  business  oligarch  j 
as  definite  and  powerful  as  any  political  machine  that  ever  ruled  modern  affairs 
or  any  old  world  royalisl   regime  that  crowned  a  puppel  king.     One  competent 

authority    likens   this   modern    body    of   representatives   of   the    people's   wealth    to 

the  highest  representative  body  in  American  politics  and  dubs  it  "the  senate   of 

American    finance."       Ami    in    speaking   <>l     the    power   of   this   clique   or   husim  98 

oligarchy  the  Wall  Street  Journal  has  said,  "It  would  nol  be  too  much  to  Bai 
that  they  an-  more  powerful  1 1 1 .- 1 n  the  ninety  men  who  constitute  the  senate  of 
the  United  State.,  for  thej  who  control  the  purse-strings  of  the  country  its 
productive  and  distributive  energies     control  the  country." 

Now    for   a    few    detailed    facts.      If   we   run    through   th<    "Directory    of 

'.'.V, 


THE  SENATE  OF  AMERICAN  FINANCE. 


Directors  of  V\\  York"  we  learn  thai  it  is  common  custom  for  one  man  to 
serve  in  many  corporations  in  the  capacity  of  director  thai  is,  to  be  1 1 k-  active 
managing  overseer  and  careful  judge  of  the  investors  of  the  country  who  put 
their  savings  in  the  securities  of  these  corporations.    If  we  watch  closely  enough 

«i'  find  that  in  hundreds  of  cases  the  names  of  the  directors  arc  those  of  clerks 
in  the  office  of  some  trust  company  which  does  business  for  the  corporation  in 
question,  or  of  those  in  the  office  of  one  of  the  big  money  or  industrial  kings. 
Such  are  "dummies,"  paid  to  direct  at  the  dictation  of  the  masters,  to  vote  on 
great  and  momentous  questions  at  command  and  to  run  at  the  heck  and  call  of 
those  in  control.  It  is  not  of  these  that  "the  senate  of  American  finance"  is 
made  up. 

If  we  examine  a  little  further  we  find  names  that  recur  again  and  again  in 
most  of  the  big  companies  of  the  country,  names  that  to  the  ear  are  familiar. 
We  see  by  comparisons  that  these  are  they  whose  hired  servants  act  as  "dum- 
mies." If  we  compute  the  Dumber  of  places  on  the  board  of  directors  of  each 
of  the  principal  corporations  of  power  in  finance,  commerce  and  industry — 
concerns  that  hold  one-fifth  of  the  wealth  of  the  country  in  their  power — we 
find  the  total  to  fall  short  of  1,500.  Now,  it  does  not  follow  that  all  these 
places  arc  tilled  by  separate  men.  That  is  decidedly  what  does  not  happen  in 
this  age  of  concentrated  power.  On  the  contrary,  about  1,000  men  are  the 
representatives  of  the  ninety-two  principal  corporations  and  partnerships 
hanking  houses,  hanks,  trust  companies,  life  insurance  companies,  railways  and 
industrial  and  miscellaneous  concerns — which  we  have  under  examination.  Nearly 
one-third  of  these  directorships — 4-10  in  number,  to  be  exact — are  filled  by  72 
nun.  Not  one  of  these  men  holds  a  place  on  less  than  two  boards  of  directors 
and  many  of  them  hold  10  to  25  positions,  testifying  to  their  widespread 
influence.  Let  us  sec  what  interests  these  seventy-two  men  dominate.  Among 
financial   houses  and  companies   they   wield  almost  entire  control  of: 


.1.  I'.  Morgan  &  Company,  j  Who  are  hankers  extraordinary  to 
Kuhn.  Lo.h  .V  Company,  \  the  Money  Trust,  Railway  Trust, 
Speyer  &  Company,  )  Life  Insurance  Trust,  etc. 


Mutual   Life    Insurance   Company,   of   New   York, 
Equitable  Life  Assurance  Society, 
\.  v,    York   Life   Insurance  Company, 
Metropolitan  Life  Insurance  Company, 
Prudential  Insurance  Company  of  America, 
Provident  Life  and  Trust  Company, 


"Big  Six,"  or 
Life   Insurance  Trust. 


THE  SENATE  OF  AMERICAN  FINANCE. 


257 


National  City  Bank,  New  York, 

First   National  Bank,  New  York, 

National   Bank  of  Commerce,  New  York, 

National  Park  Bank,  New  York. 

American  Exchange  National  Bank,  New  York, 

Hanover  National  Bank,  New  York, 

Chase    National    Bank,    New    York, 

Corn  Exchange  Bank,  New   York, 

Chemical   National  Bank,  New  York, 

Fourth   National  Bank,  New  York, 

Citizens  Central  National  Bank,  New  York, 

Seaboard   National   Bank,  New  Y^ork, 

Manhattan  Company,  New  York, 

Bank  of  New    York, 

First    National    Bank,   Chicago, 

Continental   National   Bank,  Chicago, 

Commercial  National   Bank,  Chicago, 

National   Shawmnt   Bank,  Boston, 

Philadelphia   National   Bank, 

Fourth   Street    National    Bank,   Philadelphia, 

Third    National    Bank,   St.    Louis, 

United   States  Trust  Company,  N<\\  York, 
Union  Trust  Company,  New   York, 
New  York  Security  and  Trust  Company, 
Morion  Trust   Company,  New  York, 
Guaranty  Trust  Company,  New  York, 
Farmers'  Loan  and  Trust  Company,  New  York, 
Central  Trust  Company,  New    York, 
Mercantile  Trust  Company,  New  York, 
Illinois  Trust  and  Savings  Bank,  Chicago, 
old  Colony  Trust   Company,  New  York, 
Union   Trust   Company,   Pittsburg, 
Industrial  Trust  Company,  Providence,  R.  [., 


I 


The  Money  Trust 
of  America. 


Consolidated  Gas  Company,  New    York,  J 

Brooklyn  Rapid  Transit  C pany,  New   York  publi< 

[nterborough   Rapid  Transit   Company,   ' 


ut  Hit  ies  t  rust. 


»58 


THE  SENATE  OF  AMERICAN  FINANCE. 


>     The  Railway  Trust. 


Pennsylvania  Railway, 

\,  w   York  Central, 

The  Erie, 

Delaware,  Lackawanna  &  Western, 

Lehigh  Vallej . 

Delaware  &  Hudson, 

Baltimore  &  Ohio, 

The  Reading  Company, 

Chesapeake  &  Ohio, 

Louisville  &  Nashville, 

Atlantic-  Coast   Line, 

Northern  Pacific-, 

Union  Pacific, 

Missouri  Pacific, 

Great  Northern, 

Atchison,  Topeka  &  Santa  Fc, 

Chicago,  .Milwaukee  &  St.  Paul, 

Illinois  Central, 

vVabash, 

Southern  Pacific,  J 

Armour  &  Co., 

Nelson  Morris  &  Company, 

National  Packing  Company, 

Swift  &  Company, 

United  States  Steel  Corporation, 

Standard  Oil  Company, 

American  Sugar  Refining  Company, 

American  Telephone  and  Telegraph  Company, 

American  Tobacco  Company, 

Central   Leather  Company, 

International  Mercantile  Marine, 

International  Paper  Company, 

International  Harvester  Company, 
General  Chemical  Company, 

Pullman  Company, 

National  Biscuit  Company, 

Associated  Merchants  Company, 

American   Smelting  and   Refining  Company, 

Following    are    the    names    of    the    members    of    this    "senate    of    American 

finance": 

James  \Y.  Alexander,  John  Jacob  Astor, 

Oliver  Ames,  Geo-  F-  Baker, 

J.  Ogden  Armour,  August   Belmont, 


Great  industrial  trusts 
of  America. 


J 


THE  SENATE  OF  AMERICAN  FINANCE. 


259 


E.  J.  Berwind, 
Cornelius  X.  Bliss, 
A.    X.    Brady, 

A.  J.  Cassatt, 

John   Claflin, 

Duinont  Clarke, 

T.   Jefferson   Coolidge, 

F.  Cromwell, 
Chauncey   M.  Depew, 
J.  F.   Dryden, 
Marshall  Field. 
Louis  Fitzgerald, 

II.  C.  Frick, 
Geo.   J.   Gould, 

F.  II.  Gary 

C.  A.   Griscom, 
James  J.  Hill, 
E.  II.  Harriman, 
Edwin  Hawley, 
H.  L.  Higginson, 
J.  H.  Hyde, 
H.  ().  Havemeyer, 

G.  G.     Haven," 

E.  C.  Hoyt, 
Adrien  Iselin,  Jr., 

A.   I).  Juilliard 
J.   \.  Jarvie, 
John  S.  Kennedy, 
Charles  Lanier, 
J.  A.   McCall, 
R.  A.  McCurdy, 
I).  ().   Mills. 
\V.    H.   Moore, 


Levi  P.  Morton, 
J.  Pierpont  Morgan, 
E.   B.    Morris, 
John  J.  Mitchell, 
W.   G.   Oaknian. 
A.   E.   Orr, 
Daniel  O'Day, 
Geo.   W.   Perkins, 
M.    Taylor   Pyne, 
C.   A.   Peabody, 
C.  M.  Prevost, 
John  1).  Rockefeller, 
Win.   Rockefeller, 
H.  H.  Rogers, 
Thos.   F.    Ryan, 
Norman  B.  Ream, 
Samuel   Rea, 
S.    R.    Shipley, 
James    Speyer, 

E.  T.  Stotcshury, 
J.  H.  Schiff, 
Samuel    Spencer, 
Charles  Steele, 
James    Stillmaii. 
Samuel   Sloan. 

1..    F.   Swift, 

II.    McK.   Twombly, 

W.   K.   Vanderbilt, 

F.  \Y.   Vanderbilt, 
P.   A.   Valentine, 
.John    I.   Waterbury, 
W.   S.    Webb, 
Henrv   Walters. 


Even  this  hiisim  ss  oligarchy  can  be  reduced  in  number  by  eliminating  some 
of  the  names  which  represent   important    interests  and  still   the  domination  "l 

American  industry  would  he  practically  as  <• plete,  for  these  great   interests 

till  would  he  largely  controlled  by  those  remaining.  If  "<•  "mil  some  of  the 
actual  heads  of  the  Beef  Trust  and  other  western  magnates  we  can  reduce  the 
number  from  Beventy  two  to  fifty  Beven.  And  even  in  the  list  of  fifty-seven 
directors  representing  nearly  1. •"><><)  directorships,  eleven  men  erv<  568  times 
as  directors,  or  on  an  average  of  over  fifty  each.  The  preceding  list  brought 
down  to  the  more  exclusive  hod v  of  fift\  Beven  members  of  the  "senate,"  with 


THE  SENATE  OF  AMERICAN  FINANCE. 


tlu-  lowest  representation  numbering  >i\.  the  highest  seventy  four,  and  the  aver- 
directorships  filled  by  each  aboul   twenty  five,  is  shown  in  detail,  with  the 
number  of  positions  filled  as  follows: 


.lam.  -  \\  .   Alexander 1  8 

John  Jacob  Astor 16 

1 1.  orge    F.    Baker t2 

August   Belmont 25 

E.  J.    Berwind 26 

Cornelius  N.  Bliss 0 

A.    V    Brady 17 

John    Claflin 16 

Dumont    Clarke 24 

1'.    Cromwell 17 

Chauncey   M.   Depew 74 

J.  1\   Dryden 10 

Adrian    [selin,  Jr 27 

II.    II.    Rogers -25 

Thomas  F.  Ryan 27 

.!.    II.    Schiff. 17 

Samuel    Sloan 31 

Samuel    Spencer 2-1 

James    Speyer 17 

Charles    Steele 32 

James    Stillman 55 

E.  T.  Stotesbury 31 

II.  MeK.  Twombly Hj 

\Y.    K.    Vanderbilt. 56 

F.  \Y.  Vanderbilt ft 

.John    I.   Waterbury 16 

\Y.  S.  Webb ' 19 

Henry    Walters 15 

.J.   S.   Kennedy 1-1 


Louis    Fitzgerald    7 

George    J.    Gould 52 

E.    II.   Gary 41 

('.    A.   Griscom l(j 

James  J.  Hill 12 

E.    II.    Harriman 1!) 

Edwin    I  law  ley    26 

James   1 1.    I  [yde 47 

Havemeyer 13 

Haven. 29 

Hoyf 6 

daivie 12 

Charles    Lanier    18 

John   A.   McCall 11 

R.    A.     MeCurdy 15 

D.    O.    Mills.  .  .' 33 

W.    H.    Moore 11 

Levi    P.    Morton 10 

J.  Pierpont  Morgan. 39 

W.    G.    Oakman 27 

A.    E.    Orr 29 

Daniel   O'Day    24 

George  W.    Perkins 11 


11. 

(). 

G. 

G. 

E. 

L. 

J. 

\. 

c. 

M. 


A.   Peabody .  . 
Taylor    Pyne. 


19 

25 


Norman  B.  Ream 30 

John  1).  Rockefeller 8 


Willi 


Rockefeller 31 


Without  #oino;  into  a  long  discussion  of  the  merits  of  such  a  business  sys- 
tem as  permits  this  concentration  of  Imsiness  trusteeships  in  the  hands  of  such 
a  -mall  number  of  men,  especially  in  this  day  of  stock  market  manipulation, 
it  may  be  -aid  that  the  question  has  been  asked  more  than  once  whether  it  is 
right  that  temptation-  of  this  sort  he  placid  before  men.  To  be  sure,  gener- 
ally  speaking,  the  name-  here  mentioned  are  considered  of  the  highest  in  the 
land.  Hut  the  authority  quoted  previously  ask-  pertinently,  "Does  this  exhibit 
mean  anything?  It  may  be  taken  for  granted  that  every  one  of  these  men 
i-  amply  qualified  by  his  wealth,  his  business  training  and  administrative  abil- 


THE  SENATE  OF  AMERICAN  FINANCE.  261 

itics  to  serve  as  director.  Their  names  are  a  tower  of  strength  to  any  cor- 
poration, a  fine  advertisement  to  it.  These  men  do  not  belong  to  the  class 
of  'dummy'  directors  in  the  sense  of  being  mere  pawns  for  the  real  owners 
of  the  properties,  mere  machines  responding  to  the  call  of  an  electric  button. 
They  are  great  capitalists,  masters  in  the  financial  world.  But  is  it  right 
that  there  should  be  eleven  men  serving  553  times  as  directors,  and  fifty-seven 
whose  aggregate'  directorships  are  1,460?  Is  it  possible  that  any  one  man  can 
direct,  really  direct,  twenty-five  to  fifty  corporations  situated  in  different  parts 
of  the  country  and  engaged  in  different  kinds  of  business?  Can  he  ever  in 
any  true  sense  serve  as  advisor  for  so  many  different   institutions? 

"James  J.  Hill  recently  refused  to  serve  on  the  committee  to  investigate 
the  Equitable,  stating  that  he  was  too  busy.  A  reference  to  the  foregoing- 
table  shows  that  .Mr.  Hill  is  a  director  in  only  twelve  companies,  a  modest 
employment  for  a  man  of  his  prominence.  Yet  E.  H.  Harriman,  who  is  a 
director  in  forty-nine  different  companies,  did  not  hesitate  to  accept  a  place 
on  this  committee,  and  would  no  doubt  have  taken  upon  himself  the  respon- 
sibility of  acting  as  its  chairman  if  he  had  been  asked.  Mr.  Harriman  has 
the  time  to  serve  as  director  of  about  thirty  railway  companies,  four  or  five 
electric  traction  companies,  ;i  half  dozen  steamship  companies  as  well  as  o\' 
banks  and  trust,  insurance  and  telegraph  companies.  He  has  interests  in 
nearly  every  state  of  the  union,  and  is  credited  with  haying  such  power  over 
the  politics  of  \eu  York  as  to  be  able  to  dictate  the  re-election  of  Senator 
Depew.  Yet  he  finds  time  to  reform  the  Equitable!  Mr.  Depew  has  so  much 
time  left  on  his  hands  after  looking  after  the  seventy  four  corporations  of 
which  In'  is  director  that    he  is  able  to  represent    the  slate  of  New    York   in  the 

senate. 

"There  i>  evidently  something  wrong  in  this  stale  of  things.  It  is  a  per- 
version of  the  director  system.  II  is  liable  lo  grave  abuses,  II  is  a  convenient 
method  of  concentrating  power,  but   il   must   result   in  directorships  being  used, 

P.   a    dangerous   extent,    fo]    personal    gain,   instead   of   being   a    trust    for   others. 

It  is  absurd  to  saj  that  an\  man.  however  great  his  ability,  can  in  anj  true 
sense  serve  ae  a  director  in  a  many  as  fifty  corporations.  This  is  one  of  those 
developments  of  the  past  twentj  five  years  which  by  revolutionizing  the  condi 

tioiis   under   which    great    business    is   conducted    have    produced    mu    problems    |() 

b,    wived." 


t*  HI  ■"        T3 

«  1  C         C 

_  •«  -o  «i  >J 

o      *•*  „ 
(D  C  rt  c 

I-  !>0  '5  u  ', 

SSS    2 

rt  °  « .£  c 

(_£  >  3 
d  <D  .,  cS  O 

3       >,«> 


CHAPTER    XXI 

THE  BIRTH   OF  THE  TRUST. 

Horc  Great  Combinations  of  Capital  Have  Multiplied — The  Harvest  Time  of 
the  Promoter  and  the  Manipulator — Dummy  Directors  and  Trust  Nur- 
series— The  Nation  Becoming  Aroused  to  the  Facts. 

While  the  Standard  Oil  Company  was  organized  in  1885  and  the  American 
Sugar  Refining  Company  in  1887,  thus  marking  the  beginning  of  the  trust 
movement  which  has  made  this  age  epochal  in  the  history  of  the  world,  and 
the  great  impetus  to  industrial  combination  was  given  then,  the  Trust  Period 
may  be  dated  from  1898.  In  fact,  in  the  three  years  between  that  date  and 
the  close  of  1900  one  hundred  and  forty-nine  large  industrial  combinations 
were  formed,  having  a  capitalization  of  over  $3,000,000,000.  Since  that  time 
the  capitalization  of  trusts  has  been  doubled  by  new  combinations. 

Presumably  the  movement  would  have  begun  to  take  on  its  destined  form 
earlier  had  it  not  been  for  the  panic  and  hard  times  following  upon  the  failure 
of  the  great  English  banking  house  of  Baring  Brothers  in  1890,  which  left 
results  that  were  felt  for  several  years.  It  was  not  until  after  the  revival  of 
business,  which  began  with  1897,  when  the  free  silver  scare  had  died  out  and 
President  McKinley  had  taken  office,  that  shrewd  business  men  began  to  take 
advantage  of  lessons  they  had  learned  from  some  of  the  earlier  industrial  com- 
binations. By  1898  business  was  in  good  shape.'  The  investor  who  had  been 
frightened  away  from  stock  markets  came  out  again  looking  for  bargains. 
Railways   increased   their  earnings   remarkably   and   the  demand   for  securities 

to  share   in   abundant   dividends  attracted   general   attention.      The  time   was   ripe 
for    new    projects  and    the    promoter  seeing  opportunities   to   merge   many    sepa 
rate  businesses  or  manufactories  of  one  trade  into  a   single  large  corporation 
set  to  work  with  a  will  to  gain  profits  through  the  establishment  of*  numerous 
monopolies. 

There    had    been    a    cause    for    this,    however,    aside    from    the    attraction    that 

profits  had  for  such  geniuses  of  promotion  as  J.  P.  Morgan,  \Y.  H.  Moore, 
and  others.  For  one  thing,  captains  of  industry  desired  an  end  to  costly 
competition.  This  had  been  shown  in  the  <  volution  of  trade  methods  before 
the    greal    trust    period    sel    in.      In   the   iron   .and    steel    industry,   where   the 

S63 


264 


THE  BIRTH  OF  THE  TRUST. 


greatest  number  of  minor  trusts  had  been  organized,  there  had  been  great 
warfare.  This  industry  naturally  grouped  itself  about  Localities  where  good 
transportation,  proximity  to  coal  fields  and  ore  districts  and  kindred  natural 
advantages    permitted    of    economical    production.      Certain    companies    ruled 


VIEW    OF    ONE    OF    CHICAGO'S    NEWEST    AND    HANDSOMEST    PLAYHOUSES. 

This  is  one  of  two  theaters  in  Chicago  belonging  to  the  so-called  theatrical  trust,  it 
has  been  shown  in  the  evidence  given  in  a  suit  al  law  brought  against  the  trust,  that  the 
combination  controls  sixty-five  first-class  theaters  in  every  pari  of  the  country.  As  far  as 
is  known  upon  face   it    is  claimed  that  the  trust,   through   its  monopoly  of  the  theaters 

of  most  of  the  principal  cities,  has  been  able  to  prevent  great  dramatic  stars,  who  are  not 
under   its  management,   from  appearing  in   first-class   houses,   without  extortion,   etc. 

given  territories  and  were  jealous  of  that  influence.  Distance  from  market 
checked  severe  competition  to  a  certain  degree,  but  some  of  the  great  coin- 
panics  were  so  well  located  that  frequently  they  were  able  to  compete  within 


THE  BIRTH  OF  THE  THE  ST.  265 

the  territory  of  other  concerns.  In  order  to  get  business  it  happened  some- 
times that  a  great  concession  in  prices  was  made.  For  instance,  in  1899,  prior 
to  the  organization  of  the  United  States  Steel  Corporation,  steel  billets  which 
were  quoted  at  $34  a  ton  actually  sold  at  $16,  and  steel  rails,  nominally 
quoted  at  $32,  were  sold  at  $16. 

Not  only  in  this  line  of  industry  but  in  many  others  there  was  competi- 
tion which  was  good  for  neither  producer  nor  consumer.  Wide  fluctuation 
in  prices  of  any  commodity  upset  calculations.  "Competition  might  be  con- 
sidered the  life  of  trade,  but  at  the  close  of  the  last  industrial  depression  it 
was  regarded  as  the  death  of  profits,"  says  Professor  Meade.  "It  was  highly 
desirable  from  the  manufacturer's  point  of  view  to  stop,  or  at  least  to  abate, 
this  struggle,  which  benefited  nobody  save  the  consumer,  and  which  even  in 
his  case,  in  the  field  of  production  goods,  had  to  be  straightway  passed  on  to 
his  customers.  The  producers  were  tired  of  working  for  the  public.  They 
desired  a  larger  profit  without  such  an  effort  to  gel  it.  and  they  wished  to 
have  that  profit  available  for  distribution  and  not  locked  up  in  plant  and 
equipment." 

One  of  the  logical  methods  of  regulating  competition  before  the  advent  of 
the  trust  had  been  the  formation  of  pools,  or  voluntary  associations  of  pro- 
ducers to  secure  profitable  prices  by  means  of  limiting  supply  through  restrict 
ing  output  and  by  maintaining  prices  to  the  consume]-  withoul  competitive 
concessions.  These  pools,  while  contrary  to  law,  exist  today  in  main  Indus 
trie-,.  Before  the  Trust  Period,  and  even  today,  the  essential  weakness  of  the 
pool  lies  in  the  inability  to  enforce  agreements.     As  has  been  staled,  the  pool 

is  a  voluntary  association  and  from  this  organization  numbers  ,(|  any  time 
could  withdraw.  In  times  of  prosperity  some  members  selfishly  desired  more 
than  their  allotted  share  of  business  and  profits,  and  they  frequently  broke 
contract-.  In  times  <>f  depression  self-preservation  prompted  similar  tactics. 
When  pooling  agreements  were  found  to  be  unsatisfactory   the  trust   movemeni 

was    well    under    way. 

0n<  kind  of  trust  consisted  of  an  agreement  to  deposit  the  stock-  of  cer 
tain  companies  in  trust  in  exchange  lor  trust  certificates  which  entitled  the 
holders  to  .-i  division  of  profits  through  dividends.  The  trustee-,  thus  managed 
thi-  various  companies  and  through  permanent  centralization  and  Belf-sceking 
rather  than  compel  it  Ion  were  able  to  restrict  trade  belter  than  had  been  the 
undei    pool    agreements.      The    fact    that    in    1890    Congress    passed    the 

Sherman  AnliTriisI  I.au  which  declared  'hat  "ever}  Contract,  combination  in 
the    form    of    trust    or    otherwise,    or    conspiracy     in    restraint    of    trade    or    com 


266  THE  BIRTH  OF  THE  TRUST. 

merce  among  the  several  states,  or  with  foreign  nations,  is  hereby  declared 
to  be  illegal,"  and  that  a  populai  outburst  developed  against  trusts,  did  not 
retard  the  trust  movement.  In  1892  the  Standard  Oil  trust  rode  around  the 
law  and  inaugurated  the  principle  of  community  of  interest.  New  Jersey  was 
the  instrument  used.  In  1889  through  the  efforts  of  the  lather  of  the  trusts. 
James  B.  Dill,  the  corporation  law  of  that  state  was  changed  so  as  to  permit 
a  corporation  organizing  for  the  general  purpose  of  owning  stock  or  prop- 
erty   of   other  corporations. 

Here  was  the  solution.  If  a  combination  were  desired  so  as  to  gain  the 
necessary  monopoly  to  regulate  prices  it  was  simply  a  matter  of  forming  a 
holding  company  to  acquire  the  stocks  of  other  corporations.  It  was  an  easy 
matter  to  accomplish  this,  for  the  law  required  only  a  small  fee  and  annual 
tax ;  the  maintenance  of  a  "principal"  office  in  the  state  with  a  conspicuous 
sign  indicating  the  local  of  such  office,  a  legal  representative  and  stock  trans- 
fer books:  an  annual  report  to  be  made  to  the  secretary  of  state;  annual  meet- 
ings to  be  held  inside  the  state,  and  one  diretcor  a  state  resident.  Aside  from 
thus  giving  impetus  to  the  trust  movement,  officials  of  the  state  aided  in  the 
formation  of  numerous  trusts  and  even  founded  a  trust  company  to  act  as 
trustee  and  legal  representative  and  to  drum  up  business  in  trust  formation 
until  New  Jersey  became  known  as  the  home  of  the  trusts.  Indeed  so  bent 
upon  making  money  by  this  method  were  the  state  and  its  officials  that  they 
carried  the  thing  to  farcical  extremes.  One  trust  company  in  Camden  displays 
on  a  small  sign  board  at  its  entrance  the  names  of  some  800  corporations, 
indicating  that  this  is  the  "principal  place  of  business''  of  these  concerns,  most 
of  which  are  doing  business  in  other  states.  An  employe  of  tins  trust  company 
acts  as  the  New  Jersey  "dummy"  director  of  hundreds  of  these  corporations. 

Watered  Stock:   The  Promoter's  Fee. 

Wh.ii  it  became  apparent  to  many  business  men  that  in  combination  there 
was  a  great  economy  to  be  effected,  especially  if  the  combination  could  bring 
about  anything  like  the  monopoly  desired  to  make  the  trust  the  regulator 
of  prices  in  the  market  for  its  given  commodity,  there  was  a  number  of  per- 

-  who  arose  to  take  advantage  of  these  conditions  and  to  do  the  active  work 
of  forming  the  trusts.  These  were  the  financial  middle  men  or  promoters,  and 
generally  -peaking,  their  fees  for  establishing  the  trusts  which  now  dominate 
business  America,  was  "watered"  stock,  which  also  was  paid  for  by  the  "dear 
public." 

It  would  b<    beside  the  facts  to  say  that  the  promoter  even  of  the  trust  does 


THE  BIRTH  OF  THE  TRUST.  267 

not  perform  a  good  and  specific  service  for  the  community  at  large,  lint  let  us 
see  what  this  service  is  and  try  to  determine  whether  it  was  overpaid.  We 
have  seen  that  in  any  period  of  very  serious  competition  there  is  a  tendency 
for  wide  fluctuations  in  prices  of  any  commodity.  This  is  bad  for  business. 
A  man  would  rather  be  sure  he  could  earn  a  moderate  and  steady  profit  than 
a  great  profit  one  year  and  none  the  next.  Therefore  we  know  that  it  was  the 
desire  of  the  great  commercial  concerns  to  avoid  this  excessive  competition 
and  to  do  it  by  consolidation.  But  aside  from  the  combination,  which  was  es 
pected  to  control  such  a  great  percentage  of  business  in  a  given  line  that  there 
would  be  no  serious  price  cutting  and  loss  through  competition,  rather  there 
would  be  the  power  to  force  high  prices  on  the  public,  there  were  other  sa\ 
ings.  A  great  organization  could  buy  its  raw  materials  in  the  lowest  market. 
It  could  force  great  concessions  from  the  railways  in  the  matter  of  rebates, 
prompt  deliveries  or  kindred  favors.  Consumers  who  were  inclined  to  drive 
hard  bargains  successfully  under  competition  or  who  were  in  a  great  hurry  to 
have  their  orders  filled,  could  be  held  in  line  without  fear  of  losing  their  trade. 
Pressure  could  be  brought  to  bear  upon  retailers  by  manufacturers  not  to  cut 
prices.  And  finally,  though  the  great  growth  of  copartnerships  and  com 
paniefl  before  the  Trust  Period  had  been  accompanied  by  the  growth  of  great 
labor  unions,  the  trusts  found  greater  power  in  fighting  the  laborer's  de 
mand   for  shorter  hours  or  higher  pay   through  combinations  than  otherwise. 

With  all  these  advantages  of  cooperation  among  manufacturers  at  the 
dawn  of  the  Trusi  Period  there  were  numerous  eases  where  consolidation  was 
greatly  desired  by  competitive  interests,  which  could  not  lie  gratified  l>\ 
tin-  formation  of  a  trusi  for  several  years  just  because  the  promoter  could  not 
attend  to  the  business  a1  the  time.  This  suggests  that  the  promotion  of  trusts 
wa-  a  difficult  task,  and  so  it  was.  In  some  cases,  of  course,  where  several  big 
concerns  were  to  be  broughl  together,  the  owners  of  each  individual  plant 
had  high  ideas  about  the  value  of  their  property.  Souk  times  they  were  the 
strongest  men  of  the  trade  and  were  not  particularly  desirous  of  combining, 
while  many  smaller  men   wished  to  see  the  combination  broughl   about.      Here 

was    a    hard    task    for    the    promoter,    for    without    tin     biggesl    men    in    the    com 
lnn.it  i  r  >  1 1    the   trust    would    not    approach   a    monopoly    of   the   incjustry   and    would 
fail    of   the   desired    results.      There  ton     one    thing    Deeded    bv    tin     promoter    was 

a  greal  dial  of  tact  in  order  to  gel  all  sides  interested  enough  in  the  work  of 
combining  to  agree  to  anj    terms  at   all.     Hut    let    us  suppose  that    the   pro 
nioter  has  arranged  something  of  an  agreement   with  most  of  the  competitors, 
what  is  the  nexl  thing? 


!68 


THE  BIRTH  OF  THE  TRUST. 


Of  course  the  price  or  inventory  of  the  plants  is  all  important,  hut  also 
the  maimer  in  which  the  price  is  to  be  paid.  It  docs  not  matter  quite  so 
much  it'  the  biggesl  man  demands  more  in  proportion  than  is  due  him  for  his 
plants,  for  this  can  he  offset  perhaps  by  threatening  to  leave  some  small  con- 
cern out  of  the  fold  and  thus  forcing  him  to  come  in  at  a  price  low  enough 
to  balance.  Hut  with  the  completion  of  this  delicate  work  which  the  promoter 
must  perform,  that  of  providing  the  money  to  carry  the  trust  to  completion  is 
perhaps  more  arduous.  In  the  first  place,  the  promoter  generally  has  banking 
associations  which  will  advance  money  on  a  good  proposition.  This,  perhaps, 
the  individual  members  of  the  proposed  trust  could  not  secure  unaided.     Then 


BIED'S-EYE    VIEW    OF    A    GBEAT    PENNSYLVANIA    STEEL    MILL. 

there  is  a  great  deal  of  figuring  to  he  done  to  ascertain  whether  stocks  and 
bonds  of  the  trust  can  he  marketed  to  the  speculative  and  investing  public  on 
terms  enough  good  to  carry  the  deal  through.  Next,  the  merging  interests 
must  he  coaxed  into  taking  some  of  these  stocks  and  bonds  in  payment  for 
their  plants,  for  if  the  men  who  are  forming  the  trust  themselves  do  not  think 
well  enough  of  the  trust  to  invest  in  its  securities,  the  public  surely  will  be 
skeptical. 

After   these   plans  are   roughly   sketched   out    the   promoter  finds  himself  in 
this   position:     He  has  options   by   which   he  can   purchase  all  the  plants  in  a 


THE  BIRTH  OF  THE  TRUST.  269 

given  industry  at  a  certain  figure;  he  has  interested  certain  bankers  or  an 
underwriting  syndicate  to  assist  him  in  finding  a  market  for  stocks  and  bonds, 
and  he  has  secured  agreements  from  the  plant  owners  to  take  part  payment 
for  their  share  in  the  trust  in  securities.  Before  this  he  has  figured  out  just 
what  he  is  to  pay,  but  let  us  see  how  he  pays  and  where  the  money  comes  from. 

In  the  first  place  the  plant  owners  have  not  consented  to  come  into  the 
scheme  except  at  a  satisfactory  price,  which,  of  course,  means  a  high  price. 
The  plants  now  may  be  running  on  a  profit  of  10  per  cent  to  their  owners; 
but  the  prospect  of  controlling  the  market,  of  saving  money  through  absence 
of  competition  and  holding  the  market  price  level,  to  say  nothing  of  the  other 
power  gained  by  bigness,  suggests  that  this  profit  can  be  raised  to  20  per 
cent.  Therefore  the  promoter  figures  the  20  per  cent  income  as  the  fair 
basis  for  capitalizing  his  trust.  If  the  companies  or  plants  which  separately 
earned  10  per  cent  were  valued  at  $5,000,000,  the  trust  would  hi'  considered 
worth  at  least  twice  that  amount.  The  difference  of  $5,000,000  does  not  repre- 
sent value  invested,  save  in  the  fact  that  combination  is  of  value.  When  actual 
cash  lias  not  been  paid  in  for  the  stock  of  a  company  at  100  cents  on  the  dol- 
lar, or  at  par,  it  is  said  the  stock  is  "•watered."'  In  this  case  the  ••water"  in 
the   stock    is   $5,000,000. 

Now.  the  way  the  plants  are  paid  for  are  several,  but  a  typical  case  would 
be  for  the  promoter  to  organize  the  new  trust  with  a  certain  amount  of  bonds, 
some  preferred  stock  and  some  common  stock.  Bonds  must  be  stricth 
limited,  especially  in  a  manufacturing  company  where  profits  are  big  one 
year  and  small  another,  for  interest   must  he  paid  regularly  on  bonds,  whereas 

profits  can  be  divided  <>n  slock  as  they  are  earned,  and  of  coins,  are  not 
divided   if  not   earned.      Some  trusts   formed  did   not    put   out   bonds  at   all.  and   in 

thit    case  there  was  no  debt   againsl    the  company   to  cause  prospective  inves 

tors    to   doubt    the    value   of    the    stocks.       In    some   cases,    however,    the    men    who 

-old  out   their  plants,  as  Carnegie  did  to  the  United  States  Steel  corporation, 

were   in   a    position    to   insist    upon    getting   bonds,   which   constituted   a    mortgage 

on    the   trust.      If  it    was  not    bonds,   the   plant    owners  ,il    [east    insisted   upon    pre 

ferred  stock,  where  they  had  first  show  at  the  dividends,  generally  the  dividends 

were  made  accumulative  so  that  those  that  were  not  paid  one  year  would  be 
paid    up   another  and    thus    insure   the   old   owners   seemingh    at    least    ;,s    good    in 

vestments  as  they  had  had  in  their  own  businee 

The    method    of    Capitalizing    the    trust     was    Usually    on    the    basis    of    actual 

value  of  the  plants  for  the  preferred  stock.     That   is.  if  $5,000,000  worth  of 

plants   were   being   merged    into   a    trust    the    preferred   capital    would   be   at    hat 


870  THE  HI  Rill  OF  THE  TRUST. 

tins  amount  It  might  be  the  men  combining  drove  a  hard  bargain  and 
wanted  a  greai  deal  in  cash  for  their  plants,  in  which  eveni  some  bonds  might 

be  [nit  out  or  the  preferred  stock  increased.  Then,  as  we  have  seen  the 
monopoly  value  of  the  trust  and  the  force  of  the  combination  would  promise 
doubled  earnings,  something  like  $5,000,000  of  common  stock  would  he  issued. 
From  this  several  persons  must  get  their  shares  of  the  profits  of  consolidation. 
Generally  the  plant  owners  want  something  besides  the  face  value  of  their 
plants.  So  they  get  a  homis  of  a  few  shares  of  common  stock.  But  it  is 
presumed  that  the  new  concern  will  have  to  have  a  greatly  increased  cash  sur- 
plus, perhaps  improved  plants,  to  do  business  as  the  trust,  and  for  the  time  new 
working  capital  is  necessary.  The  promoter  must  see  to  this  and  in  that  case 
the  capital  stock  must  he  increased.  Then  the  promoter  himself  must  get  his 
pay  and  it  is  big  according  to  the  size  of  the  project.  So  the  stock  must  be 
increased  still  more  above  the  face  value  of  the  original  plants.  By  this  time 
the  trust's  capital  may  have  swollen  to  $15,000,000. 

There  is  something  of  a  good  reason,  possibly,  for  this.  The  organizers 
know  that  the  public  will  not  pay  full  price  for  the  stock  until  the  company 
lining  on  its  new  capitalization,  hence  the  promoter  figures  on  selling  the 
common  stock  at  about  50  per  cent  of  its  par  value.  And  even  here  he  has 
to  call  in  the  underwriting  syndicate  to  advance  money  and  take  the  stocks  of 
the  trust  in  payment.  The  underwriters  generally  want  not  only  profits  but 
i  commission  besides  for  selling  the  stocks  later  to  the  public.  All  this  shows 
that  while  there  may  be  economy  in  the  great  combinations,  it  is  so  great  an 
undertaking  to  bring  the  competing  interests  together  into  a  trust,  that  big 
compensation  is  demanded  and  given  to  the  men  who  merger  the  companies. 

All   this   would   be   well  enough,   perhaps,   if  the  earnings  of  the  trusts  as 
estimated  for  the  basis  of  capitalization  would  pan  out  up  to  promises.     The 
public,  knowing  little  of  the  real  financial  conditions  of  the  great  combinations, 
believes    dividends    started    in    order   to   make   the   stock    look    attractive   are   to 
i  ndure    for   all    time.      But    the    promoter   has    judged    of   the   effect   dividends 
would  have  on  the  investing  public  and  insists  upon  the  payment  of  them  when 
earnings  should  have  gone  to  pile  up  needed  capital  with  which  to  operate  the 
company  or  to  accumulate  a  surplus  for  future  needs.     This  draws  the  investor 
speculative  stocks  and   when,  because  of  the  enormous  amount  of  fictitious 
pital   in  tin    trusts  and  because  of  the  decline  in  business  that  comes  period- 
ically, earnings  fall  to  the  point  where  dividends  cannot  be  paid,  the  innocent 
•md  ignorant  investors  are  the  losers  of  their  invested  capital  to  a  great  degree. 
It   i>   the   sin   of  "watered"    stock,  that  has  brought   out   perhaps   one   of  the 
atest  complaints   from  the   public  at  Large  against  the  trusts. 


CHAPTER   XXII 

"GOLD  BRICKS"— FRAUD  UNDER  THE  GUISE  OF  SPECULATION. 

lii'iico  Games  in  the  World  of  Finance — Traps  Baited  with  Promises  of  Big 
Dividends — Typical  "Get-Rich-Quick"  Schemes — Fake  Banks  and  Fake 
Credit  Agencies  and  References — The  Work  of  the  Bucket  Shop — The 
Rule  for  Safety. 

It  WOUXD  seem  that  nearly  over}7  bunco  game  conceivable  had  been  exposed 
long  ago  and  that  people  having  money  to  invesi  could  have  Learned  the  les- 
sons taught  by  the  experience  of  those  who  have  bought  "gold  bricks."  But 
everv  day  turns  up  some  new  scheme  by  which  the  man  with  a  few  dollars 
is  relieved  of  his  property  with  speed  and  deftness.  The  device  perhaps  most 
in  use  today  to  part  a  man  from  his  hard-earned  savings  is  that  which  mas- 
querades under  the  guise  of  speculation.  The  man  who  has  laid  by  a  few 
dollars  after  years  of  hard  work  desires  to  "make  his  money  work."  Undoubt- 
edly this  is  wise.  The  principal  basis  of  modern  business  is  credit  and  those 
who  have  accumulated  capital  always  should  be  able  to  make  that  capital 
earn  them  an  income.  But  the  investor  who  knows  little  or  nothing  of  the 
wuvs  of  investment  hears  the  tales  of  how  the  kings  of  finance  have  made 
fabulous  fortunes  in  a  f<  u  years  <>r  even  months  through  some  great  specula 
tive  venture  and  they  would  emulate  their  examples.  Such  a  prospective 
investor  i-  ripe  fruit  for  the  plucking  by  the  first  unprincipled  knave  thai 
comes  along. 

The  first  thing  that  is  offered  the  guileless  possessor  of  money  is  a  big  ilivi 
dend.  Bright  and  gilded  prospectuses  of  some  far  away  gold,  silver  or  cop 
per   mine,   oil    well,    rubber,   sugar,   or   pineapple    plantation   or   what-not    are 

gent    to    people    who   are   known    to   have   a    little    money    to    invest.      These    pros 

pectuses  always  promise  "safe  investment"  and  the  "largest  possible  dividends." 
Some  of  them  go  so  far  as  to  "guarantee"  dividends  on  stock  which  at  best  is 
"watered"  several  hundred  fold.  Beside  using  the  mails  to  send  out  tin-. 
pamphlets  to  tin  unsuspecting  public,  the  robbers  who  represent  themselves  to 
be  iii.iii.ium~  of  legitimate  business  corporations  often  advertise  at  great  length 
in  the  newspapers  of  the  country  in  order  to  catch  the  eye  of  their  victim. 
The  dividends  promised  are  almost  always  so  enormous  that  the  most  ignorant 

271 


/"/,'  WD  UNDER  GUISE  OF  SPECULATION. 

person  should  have  his  suspicions  aroused.  Ten  per  cent  is  generally  the 
Kast  promised  and  mosl  frequently  the  immediate  prospeci  held  out  is  for 
to  SO  per  mil  or  more  within  a  few  years."  We  quote  from  one  typical 
advertisement  of  one  of  these  "gel  rich-quick"  scheme  advertisements:  "The 
certificates  can  lu-  purchased  for  cash  or  on  the  installment  plan  to  suit  the 
subscriber.  Dividends  will  he  begun  at  once  and  will  increase  rapidly  each 
year  until  an  annual  payment  of  lM)  per  cent  or  more  is  paid.  If  //our  earn- 
ings are  small  it  is  all  the  more  reason  why  you  should  invest  them  where  the 
greatest  possible  dividends  will  be  earned." 

Now.  it  happens  frequently  that  just  such  concerns  which  peddle  stock 
to  ignorant  investors  on  the  installment  plan  are  legally  organized  and  upon 
investigation  can  prove  that  the  stock  with  which  they  are  swindling  the  public 
really  does  own  some  property  somewhere,  which  will  be  improved  or  cultivated 
or  made  to  earn  profits  for  the  stockholders.  But  these  investment  frauds 
nearly  always  are  stock  juggling  schemes  of  the  worst  sort.  At  best  such 
companies  are  organized  only  with  "prospects."  The  savings  bank  pays  3 
per  cent  interest  on  savings  deposits.  This  is  the  measure  of  safety  by  which 
ignorant  investors  should  judge  investments.  Consider  then  the  fine  promises 
of  ten,  twenty,  thirty  or  even  100  per  cent  income.  The  stock  peddler  of 
the  illegitimate  sort  points  out. that  Calumet  and  Hecla  Copper  shares  once 
sold  for  a  very  low  price,  that  this  or  that  plantation  reaps  great  rewards  for 
investments  made  long  ago.  True.  Today  there  is  as  great  wealth  to  be 
made  in  such  enterprises  as  at  any  time  in  history.  But  the  point  to  be 
dwelt  upon  is  thai  the  legitimate  enterprise  based  upon  sound  management, 
financial  methods  and  honesty  at  best  is  a  venture.  And  the  legitimate 
venture  is  none  too  secure  to  the  investor  who  is  not  personally  informed  of 
such  matters  as  managemi  nt  and  finance. 

It  is  not  an  unusual  method  of  the  schemers  to  organize  papers  which 
purport  tf>  be  legitimate  financial  journals  in  order  to  foist  their  bogus  or 
"watered"  securities  upon  the  public.  When  this  scheme  is  adopted  the 
bogus  "financial  journal"  usually  contains  a  coupon  which  reads  something 
like  this : 

Investors  Should  Not  Speculate 

or  invest  their  money  in  any  proposition  without  a  full  knowledge  of  its  value 
and  dependability.  Not  one  third  the  enterprises  offered  the  investing  public 
arc  reliable.  So  far  as  we  are  able  we  will  be  pleased  to  be  of  .service  to  our 
readers  who  make  use  of  the  following  blank: 


FRAUD  UXDEH  GUISE  OF  SPECULATION.  273 

Editor  Chicago  Daily  Financial  and  Industrial  Bulletin : 
Dear  Sir: — Please  give  me  your  opinion  concerning 

(Full  name  of  company) 

(General   Offices)    

No  charge  made      ]  Name 

for  information  if   >  Address 

stamp  is  enclosed.     )  City  and  State 

This  sort  of  bunco  game  embraces  sending  the  "financial  journal"  to  people 
who  have  been  approached  with  a  certain  "get-rich-quick"  stock  scheme,  or 
who  will  be  approached.  If  the  investor  is  ignorant  of  such  practices  he  may 
fill  out  the  blank  requesting  information.  Invariably  he  receives  an  immediate 
reply  approving  the  stock.  Or  an  advertisement  appears  in  the  paper  which 
courts  investigation  for  the  stock.  Sometimes  the  "financial  journal"  is  an 
independent  blackmail  sheet  run  for  fraudulent  purposes  and  in  that  case  it 
will  approve  of  any  bogus  concern  which  will  divide  the  spoils.  In  order  to 
make  the  paper  appear  genuine  some  companies  are  attacked.  Financial 
gossip  is  copied  from  other  papers  to  give  the  sheet  a  genuine  appearance. 
Such  papers  frequently  demand  advertising  from  men  who  are  running  small 
but  legitimate  mining  or  plantation  stock  companies  and  who  wish  to  sell 
stock  to  increase  their  business.  If  the  advertisements  are  not  given,  the  paper 
generally  threatens  to  "expose"  the  managers  for  running  a  fake  or  shaky 
concern.  These  papers,  which  exist  even  in  Wall  Street,  arc  filled  with  favor- 
able "write  ups''''  of  stock  companies   which  are   prepared   to   rob  the   people. 

'I'd   -how    to    what    extremes   some   of   the  swindlers   will    go   we    print    on   the   next 

page  a  typical  advertisement  of  a  slock  "get-rich-quick"  scheme. 

When    the    speculative    swindler    is    not    at    work    on    stock     jobbing    schemes 

he  is  running  a  blind   pool   in   wheat,  corn,  cotton  or  some  other  commodity 

which    makes    alluring    bait     for    the    unwary.       Circulars    are    mailed    broadcast 
to    people    in    the   country    districts,    telling   of   great    fortunes    made   by    the   big 

-peculators    and    setting    forth    the    "secrets    of    success*'    in    speculation.      In 

short,    they    ask    thai     the    reader    send    almost    any    amount     of    cash    to    be    put 

into  a   pool   which  will  operate  in  -lock-  or  cotton  or  grain  or  provisions — it 

does    not     matter    much     what       and    the    profits    will     be    divided.       Figures    are 

given    to   -how    how    much    can    be   earned,      [mmediate   dividends   al    fabulous 

rate-   are   promi-ed.       The   swindler-    rent    an    office    lor   perhaps   a    month,   collect 

money   from  as  many   gullible   people  as   possible,  and.  if  the  dupe-  come  in 
greal  enough  numbers  some  of  their  money  will  he  returned  at  once  a-  "divi 
dends."     This,  of  course,  serves  as  a  bail  to  attract  more  suckers.     The  news 


-  j.  FRAUD  UNDER  GUISE  OF  SPECULATION. 


SEND  IS  $10  TO  INVEST  FOH  YOU 

IF  YOU  DARK 

AFTER   YOU   HAVE   READ   EVERY   WORD  OF  THIS 

ADVERTISEMENT. 

We  begin  sending  returns  in  8  to  12  days  after  receipt  of  your 
remittance,  and  from  that  on  every  one  who  approves  of  our  plan 
is  an  enthusiastic  advertiser  for  us. 

We   judge  from  present    indications  that  our  interests  in  the  TWO 

GREATEST  AND  RICHEST  PRODUCING  GOLD  MINING 
CAMPS  IN  THE  WOULD, 

CRIPPLE   CREEK  AND  GOLD  FIELD 

in  addition  to  our  Copper  Mining  and  other  interests,  will  make  every 
si 0.00  sent  in  answer  to  our  "dare"  advertisements  bring  the  sender 
hundreds,  perhaps  thousands,  of  dollars,  even  though  we  promise 
nothing. 

THANKS!  THANKS!  THANKS!  are  coming  in  from  every 
direction.  We  could  fill  a  large  volume  with  letters  of  thanks,  for 
the  returns  we  have  sent,  from  good  people,  giving  us  their  consent 
to  use  their  names  as  references.  But  we  gave  THEM  no  references. 
THEY  took  the  leap  absolutely  in  the  dark,  and  it  would  not  be  fair 
to  bother  them  now  to  answer  letters  of  inquiry  from  others. 

When  you  send  us  $10.00  to  invest  for  you,  we  assign  to  you, 
absolutely  free  of  charge  (aside  from  the  returns  we  send  you  in  8 
to  12  days),  an  interest  in  the . 

With  the  first  returns  we  send  full  particulars  and  conditions  of 
thi>  assignment,  and  propositions  for  larger  investments  that  will 
surprise  you,  but  it  is  not  necessary  to  invest  any  more  in  order  to 

hold  your  interest  in  the ,  nor  does  that  interest  place 

any  obligation  on  you  whatever,  but  it  means  an  interest  in  all  the 
companies  named  below,  and  of  course  the  more  you  invest  the  greater 
your  interest  will  be. 

And  we  EXPECT  to  see  the  interest  of  each  one  increase  in  value 
to  hundreds,  perhaps  thousands,  of  dollars. 

The  is  the  only  concern  in  the  world  that  is  oper- 
ating on  the  plan  of  "nothing  PROMISED,  but  DO  something." 

If  you   have  sent    money   to  the  "Big   PROMISE    fellows*'   and   got 

nothing  but  loss  and  disappointment,  just  send  $10.00  (while  you. 
have  a  chance)  where  nothing  is  promised,  and  it  will  be  no  trouble 
to  decide  where  to  send  your  money  hereafter. 

We  believe  we  are  in  a  position  to  make  larger  returns  than  the 
"Big  Promise"  fellows  ever  do  make,  to  say  the  hast. 

Our  prospects  look  more  flattering  than  they  ever  did. 

We  do  no  coaxing,  but  we  would  advise  those  who  contemplate 
sending  us  $10.00  to  do  it  NOW. 


FRAUD  UNDER  GUISE  OF  SPECULATION.  ^75 

that   Mr.   Soandso   is  getting  $5   a   week   on   an   investment   of  $100   spreads 

in  many  communities.  When  enough  swag  has  been  collected  to  make  it 
worth  while,  or  if  there  are  signs  that  the  government  will  discover  their 
nefarious  business,  the  swindlers  close  their  offices,  and   fade  away. 

With  these  concerns  as  with  the  fake  stock  proposition  the  fake  financial 
paper  is  a  ready  assistant.  Furthermore,  fake  credit  agencies  and  hanks  arc 
organized  to  aid  in  the  robbery.  The  moment  the  prospective  dupe  is  senl 
a  circular  promising  gnat  and  quick  wealth,  a  credit  agency  slip  is  sent  out 
soliciting  the  business  of  making  reports  on  the  condition  of  speculative  con 
cerns.  If  the  dupe  is  tempted  to  "invest"  his  money,  he  may  stud  a  request 
to  the  bogus  credit  agency,  asking  of  the  status  of  the  blind  pool  concern. 
Invariably  a  favorable  reply  is  returned,  sometimes  with  the  reference  of  a 
bank  enclosed.  Sometimes  a  legitimate  bank  is  fooled  into  giving  references 
in  these  swindles,  but  more  often  the  bank  is  a  bogus  concern  in  itself. 

Every  now  and  then  these  "get-rick-quick"  concerns  operate  with  such 
boldness  that  the  whole  country  is  startled  with  the  magnitude  of  the  thefts. 
In  1899  W.  F.  .Miller  ran  what  was  called  the  Franklin  Syndicate  for  a  year. 
offering  520  per  cent  profit  on  money  invested  in  it.  In  that  time  this 
syndicate  distributed  $1,500,000  in  "interest"  back  to  investors.  To  show 
how  the  scheme  worked,  however,  in  twenty-three  business  days  toward  the 
close  of  the  swindle  Miller  took  in  cash  deposits  and  mail  remittances  of 
$931,000.  His  expenses  were  $138,000.  The  net  profit  on  tin.,  weeks' 
trade  was  $793,000.  He  had  17.000  depositors.  In  recent  years  dozens  of 
similar    concerns    operating    in    Chicago,    Philadelphia,    Cincinnati,    Buffalo, 

Charleston.  Boston  and  elsewhere  have  operated  with  success  to  fleece  Ig aid 

persons  whose  heads  have  been  turned  by  stories  of  speculation.  Probably 
„orie  of  these  swindles  has  raked  in  less  than  $75,000  to  $100,000.  The 
most  recent  exposure  of  this  sort  was  that  of  tin  Storey  Cotton  Company 
which   dosed    with   assets  of  only   $30,000  and    liabilities   up   in    the   millions. 

It    is  supposed   the   principals   in   this   swindle   gol    awa\    with   Si  .000. 1100. 

Closely  allied  with  this  sort   of  swindle  is  the  bucketshop.     Primarily  this 
is  sinipK    a  gambling  place  under  the  guise  of  a   legitimate  brokerage  office. 
Actually,  however,  the  bucketshop  is  a  swindling  concern,  because  it   is  organ 
i/.ed  solely  for  the  purpose  of  taking  money  from  and  not  giving  it  to  people 

who    become     their    "customers."       This     counterfeit     speculation     is     transacted 

by  making  imaginary  purchases  or  sales  of  a  speculative  commodity  accord 
ing  »,,  the  prices  made  on  bona  fide  exchanges.  There  i^.  however,  no  pur 
chase  or  -ale    of  anything.     Therefore  if  a   profit   is  to  be  maele>  by  the  "cus 


876  FRAUD  UNDER  GUISE  OF  SPECULATION. 

tomer"  it  must  come  by  chance  that  later  fluctuations  will  be  in  his  favor  and 
the  money  must  come  from  the  bucketshop.  On  the  other  hand  if  the  bucket- 
shop  win-  it  is  at  the  expense  of  the  "customer"  invariably.  When  the  buckct- 
shop  loses  too  much  to  be  convenient  it  fails. 

There  art'  all  manners  of  other  swindling  schemes  done  in  the  name  of 
legitimate  business.  One  of  the  most  sensational  affairs  in  recent  history  was 
that  where  Mrs.  Cassie  L.  Chadwick  by  presenting  forged  notes  in  the  name 
of  Andrew  Carnegie,  the  steel  magnate,  and  other  bogus  or  worthless  "security 
collateral"  was  able  to  secure  enormous  loans  from  numerous  bankers.  Expo- 
sure of  these  transactions  developed  the  fact  that  the  bankers  in  question  had 
been  tempted  by  big  commissions  for  the  loans.  Generally  these  commissions 
were  for  the  personal  benefit  of  the  bankers,  while  the  money  lent  upon  the 
worthless  collateral  was  that  of  the  bank's  depositors.  This  was  nothing  but 
"graft"   and   was  dishonest. 

Shortly  after  Mrs.  Chadwick  was  imprisoned  Frank  G.  Bigelow,  president 
of  the  First  National  Bank  of  Milwaukee,  defaulted  to  the  extent  of  nearly 
$4,000,000.  This  man  had  been  trusted  and  prominent  in  banking  circles, 
had  even  been  president  of  the  American  Bankers'  Association.  Bigelow  had 
been  a  heavy  speculator  in  all  sorts  of  enterprises  and  had  made  a  great  deal 
of  money  at  times,  but  finally  he  lost  it  all  and  more  besides.  The  directors 
of  the  bank  made  good  the  loss. 

Following  are  some  of  the  big  bank  defalcations  of  the  last  twenty  years: 

1  ss  t      Ferdinand  Ward,  head  of  Grant  &  Ward,  bankers $6,000,000 

L884 — John  ('.    Eno,   president  Second  National,   New  York 3,000,000 

L890— P.   -I.   Claassen,   president,  and  G.   H.   Pell,  Sixth  National, 

Lennox   Hill  and    Equitable 1,000,000 

1891-    Gideon  W.  .Marsh,  president  Keystone  National,  Philadelphia  1, ()()(),()()() 

L891-    .John  T.  Hill,  president  Ninth  National,  New  York 400,000 

1894 — Samuel  C.  Seeley,  bookkeeper  Middlesex  County  bank,  Perth 

Amboy,  N.  J 354,000 

11)00 — William  Schreibe'r,  trusted  clerk   Kli/abet hport   Banking  Com- 
pany,  Elizabethport,  N.  J 100,000 

1900      C.  L.  Alvord,  note  teller  First  National.  New  York 700,000 

1900— Frank   M.   Brown,  assistant   cashier  German   National,  New- 
port, Ky 200,000 

11)01--  -Henry  J.   Pleischman,  cashier  Farmers  and  Merchants'  bank, 

Los  Angeles,  Cal 150,000 

1902 — Frank  C.  Andrews,  vice-president  City  Savings  bank,  Detroit, 

Mich " 1,500,000 


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CHAPTER    XXIII 

THE    STEEL    TRUST— WONDERS    OF    THE    INDUSTRIAL    AGE. 

Sufficient  Natural  Resources  in  the  Earth  to  Promote  the  Happiness  and  Pros- 
perity of  all  Mankind — The  Universal  Demand  For  and  L'sc  of  Iron  0>\ 
Minnesota,  with  Ranges  Opened  as  Late  as  1892,  Supplies  More  Ore  Than 
Any  Other  Section  of  the  World — How  it  is  Converted  for  Use  in  the  Arts 
and  Trades. 

Greatest  of  all  the  industrial  companies  of  the  world  is  tin-  United  States 
Steel  corporation,  known  as  the  Steel  Trust,  with  its  authorized  issue  of  $550, 
()()(),()()()  preferred  stock,  $550,000,000  common  stock,  $298,000,000  collateral 
bonds,  $153,000,000  second  mortgage  bonds  and  $100,000,000  of  guaranteed 
bonds  of  subsidiary  companies.  And  yet  this  corporation  in  the  absolute  mum 
of  the  word  is  not  a  trust,  for  while  it  is  so  powerful  through  its  financial  con 
Elections  as  to  dominate  the  market,  it  controls  only  about  half  the  iron  and 
steel  business  of  the  country,  and  in  order  to  maintain  prices  often  has  to 
swing  its  power  in  connection  with  its  largest  competitors. 

ral  things  stand  out  conspicuously  to  draw  the  attention  of  the  world 
to  this  biggest  of  all  the  industrial  trusts,  so  called.  One  thing  is  its  capital 
of  more  than  a  billion  dollars.  Another  is  the  fact  that  its  employes  number 
in  the  thousands  and  are  scattered  all  >>\er  the  country  from  the  Mississippi  to 
thi  Atlantic.  Still  another  reason  is  that  the  stocks  of  this  corporation  perhaps 
were  the  most  widely  distributed  of  an}  securities  of  tin  Trust  Period  in  which 
the  ignorant  investing  public  lost  money  because  of  "watered"  stocks,  whereas 
the  "insider-,"  the  big  steel  men,  made  millions  over  night.  Then.  too.  the 
employes  of  the  corporation  weii-  sold  preferred  stock  on  the  installment  and 
profit  sharing  plan,  which  at  limes  looked  [ike  a  very  foolhardy  and  danger 
oils  policy  for  .i  great  corporation  to  sponsor,  1ml  which  .-it  the  moment  ap 
pears  \m\  profitable  to  the  employes  who  stayed  l>\  the  scheme.  The  Steel 
stocks  also  for  a  long  period  wire  the  barometers  of  the  stock  markets,  and 
because  they  fell  in  price  when  the  steel  and  iron  industry  was  had  and  the 
dividend  on  Steel  common  stock  had  to  be  passed,  causing  great  hardship 
and  ultimately  injuring  business  in  many  parts  of  the  country,  business  men 
watched  the  coursi    of  the  Steel  Trust   with  great   interest, 

. . .  i 


880 


THE  STEEL  TRUST. 


Necessity    was    the   mother   of   this    trust.      Like   many   others   the  steel   in- 
dustry was  shot    full  of   jealousies,  competition  and  strife  among  the  biggesl 
producers.     Then'  had  been  many  minor  trusts  formed  among  the  steel   pro 
ducing  companies  with   much  "water"   in   the  stocks.     This  should   have  been 

squeezed  out,  dividends  passed  and 
large  surpluses  acquired  in  order  to 
bridge  the  gap  when  steel  and  iron, 
the  "prince  or  pauper  industry,"  ran 
into  bad  business.  But  to  squeeze 
out  water  was  what  the  trust  owners 
did  not  want  to  do,  and  they  con- 
tinued to  pay  dividends  when  such 
action  was  dangerous. 

At  the  close  of  1900  some  of 
these  concerns  found  themselves  in  a 
position  which  invited  attack  by 
strong  competitors.  Business  had 
found  a  reaction  early  in  that  year, 
trade  had  to  be  adjusted  to  smaller 
margins  of  profit  if  there  was  compe 
tit  ion  and  the  forces  which  had  been 
held  back  during  the  season  of  pros- 
perity were  let  loose  to  threaten  bank- 
ruptcy in  some  concerns.  One  great 
steel  corporation,  the  Carnegie  com- 
pany, had  risen  to  a  point  where  it 
could  dominate  the  trade  of  the 
country  in  a  dull  season.  Dividends 
were  a  matter  of  secondary  consid- 
eration. Efficiency  was  everything 
and  in  the  years  1898-'99  it  was  said 
its  profits  were  over  $70,000,000. 
Now,  the  house  of  Morgan  and  the 
western  promoters  of  steel  trusts, 
William  and  J.  II  Moore,  were  interested  vitally  in  many  big  steel  concerns. 
The  Carnegie  company  could  get  along  with  the  National  Steel  company,  the 
National  Tube  company,  the  Federal  Steel  company,  the  American  Steel  and 
Wire  company  and  such  other  concerns  during  prosperity.     These  rivals  were 


J.   PIEEPONT   MORGAN. 
Ih'-    world    renowned    broker    and    financier. 


THE  STEEL  TRUST.  281 

not  independent  of  the  Carnegie  company,  indeed  they  had  worked  together  in 
harmony  much  of  the  time. 

But  finally  the  situation  narrowed  down  to  a  contest  between  the  big  and 
the  smaller  companies  for  industrial  independence  and  none  had  any  intention 
of  submitting  to  a  loss  of  its  markets.  In  the  West  tin  Federal  Steel  fought 
for  supremacy  with  the  companies  which  had  been  buying  products  from  it 
but  which  were  now  making  their  own  supplies,  while  in  the  Pittsburg  dis- 
trict the  same  trouble  confronted  the  Carnegie  concern.  The  latter  company 
even  went  to  the  extent  of  preparing  to  secure  an  independent  railway  line  to 
the  xVtlantic  seaboard.  When  competition  threatened  disaster  to  the  business 
of  the  companies  and  thereby  to  hurt  the  stock  market  through  the  slump  in 
prices  of  all  the  iron  and  steel  stocks,  the  big  financiers  sel  to  work  to  si  ve 
the  situation.  These  men,  greatest  of  them  J.  P.  Morgan,  were  desirous  of 
Moating  many  new  trusts  in  the  big  bull  market  for  stocks,  and  therefore  the} 
saw  the  necessity  of  patching  up  the  steel  row.  This  was  to  be  done  in  only 
one  way — to  unite  conflicting  interests  into  one  company.      And  this  was  done. 

The  subsidiary  companies  of  the  Steel  Trust  are:  Capital. 

The    Carnegie    Company     $160,000,000 

Federal    Steel    company    99,700,000 

National    Tube    company     80,000,000 

American    Steel    and    Wire    Company    90,000,000 

National     Steel     company     ' .-)!).()()().()()() 

American    Tin     Plate    company     t6,325,000 

American    Steel    Hoop    company     88,000,000 

American    Sheet    Steel    company 1)9,000,000 

American    Bridge    company    62,800,000 

Lake    Superior    Consolidated    [ron    Mines    30,000,000 

Shelby   Steel   Tube  company    13,000,000 

Union    Steel    company     ' 45,000,000 

Troy   Steel    Products  Company    1,100,000 

Clairton   Steel   company 13,000,000 

These  companies  have  not   losl   their  identity   in  the  Steel  corporal but 

operate  as  individual  concerns.     Indeed  many  of  them  arc  composed  of  other 
companies   which  also  work    independently.     While   this   is  true,  many  of  the 
greal   properties  of  the  several  companies  have  been  merged  under  one  head 
This  is  the  case  with  ore  and   transportation.     Coke  interests,  the  export   de 
puh, miiI  .Hid  certain  other  branches  are  also  grouped  under  a  single  head,  etc. 

The   two   greatesi    criticisms   against    the   Steel    Trust    have   been    thai    the 
public  suffered  through  curtailed  dividends  on  the  common  stock  and  the  sug 


THE  STEEL  TRUST. 

gestion  that  the  employes  were  being  taughl  to  speculate  through  buying 
stock  on  the  installment  plan.  Of  the  first  criticism  it  musl  be  said  there  is 
good  foundation  in  fact.  It  is  a  notorious  fad  thai  the  trust  was  floated 
with  abundant  water.  Mr.  Carnegie  was  paid  $447,416,640  for  his  company, 
an  outrageously  high  price  for  a  concern  which  though  it  earned  $40,000,000 
tlu.  year  0f  the  trust  formation,  had  shown  nei  profits  of  only  $6,000,000  in 
1896.  Elsewhere  the  same  watering  process  obtained.  When  poor  times  fell 
upon  the  iron  and  steel  trade,  as  fall  they  always  will,  earnings  declined  from 
as  high  as  $18,000,000  a  month  to  around  $3,000,000  a  month.  Had  there 
been  less  -water"  in  the  stock,  the  stockholders  who  had  bought  shares  with 
the  belief  that  dividends  could  he  continued  would  not  have  lost  their  invest 
ments.  Of  the  other  criticism  there  is  less  to  he  said.  It  is  the  policy  of 
the  trust  to  set  aside  preferred  stock  for  employes  on  something  of  an  in- 
surance basis  and  those  who  have  continued  steadfastly  with  the  plan  thus  far 
have  lost   nothing  and  have  promises  of  good  investments. 

Tlu  public  interest  in  great  industrial  combinations  seems  to  run  in  cycles, 
although  Hk  cycles  are  sometimes  as  short  as  the  proverbial  nine  days  which 
measure  the  lively  interest  in  any  subject.  At  one  time  it  is  the  Ship-Building 
Trust,  at  another  the  Coal  Trust,  at  another  the  Railway  Mergers,  at  another  the 
Beef  Combine,  and  again  the  Steel  Trust  that   arouses  most   general  attention. 

Steel  i-  the  material  from  which  this  industrial  age  builds  its  marvellous 
machinery,  it  great  buildings,  its  railways  and  its  steamships.  Steel  it  is,  on 
which  many  of  our  multi-millionaires  have  built   their  fortunes,  fortunes  which 

;  all  wealth  in  the  history  of  the  world.  The  Steel  Trust  it  is,  the  formation 
of  which  ha-  done  more  than  any  other  single  influence  to  draw  the  attention 
of  the  people  at  large  to  the  enormous  consolidations  of  capital  for  the  dom- 
inance of  the  industrial  world,  not  alone  in  America  but  all  over  the  globe.  So 
it  becomes  of  prime  interest  and  importance  to  observe  the  progress  of  the 
industry  and  its  products  from  the  mine  to  the  consumer. 

There  i>  a  wide  distance  between  the  primitive  miner  and  moulder  of  pre- 
historic time-,  with  his  rough  furnace,  his  rude  appliance-,,  and  the  customers 
of  hi-  neighborhood,  and  the  remarkable  organization  of  mines,  transportation 
facilities  and  manufacturing  plants  which  now  unite  to  form  the  great  iron 
and  steel  interests.  The  United  States  Steel  Corporation,  as  the  Trust  is 
officially  entitled,  with  it-  capital  of  $1,100,000,000,  is  by  far  the  greatest  organ- 
ization in  the  world.  And  yet  it  does  not  include  by  any  means  all  the  branches 
of  th<  industry  in  America  and  in  foreign  fields,  in  which  other  great  organiza- 
tions exist.      Organized  by  J.  Pierpont    Morgan  as  prime  mover,  and  including 


THE  STEEL  TRUST. 


283 


such  stockholders  as  Andrew  Carnegie,  John  D.  Rockefeller,  Marshall  Field 
and  other  national  characters,  the  very  volume  of  its  capital  and  the  diversity 
of  its  interests  have  made  it  world-famous.  Its  first  president,  Charles  M. 
Schwab,  was  reputed  to  receive  one  million  dollars  a  year  salary,  although  it 
may  be  doubted  whether  this  information  was  accurate. 

The  functions  of  this  corporation  include  the  mining  of  iron,  the  transporta- 


A  LAKE   SUPERIOR  REGION   IRON   MINE. 

N*"   other   section   of    the    United    States   and    no   other   district    In    the   world    has   shown 

such    marvelou  pment    "i    produced    si.   much    ore   as    the    region    embracing    parts   of. 

Northern    Michigan    and    Wisconsin    and    the    northeastern    portion    "i    Minnesota       whether 

me  extenl   "i    terrltorj    elsewhere  there   may  or  mas    "",    be   largei    deposit      "i    mm 

ill;.   .1.    Irable  composition  cannol   i»-  asserted,   i"i    ii    is  \>\    development    that   these 

properties    havr    become    known    and    their    reserves   approximate^    determined       This 

region    Is   unique    in    thai    Its    location    is   such    that    ore   can    i"-   delivered    t"    furnaces    In   a 

popul  .1   mi    ii..-  country,   and    there   i i   a    cheap   fuel    supply;    In   othei    words    lis 

market    facilities   are   unexcelled.      It    has    been    this    which    has   chiefly   encoui 
nomcnal   development. 


•  ion  of  it  to  its  own  milk  of  in.iny  differenl  kinds  and  in  many  locations,  and 
tin    manufacturing  of  it   into  almost   ever)    product  of  iron  and  steel   thai    i- 
demanded  on  a  large  scale,  particularly  railway    rails,  structural  steel,  bridi 
armor  plates,  tin,  sheel  steel  ami  tubes.      It  is  readily  sun  thai  the  ramifications 
«d  such  an  industry  become  world  wide, 


-M  THE  STEEL  TRUST, 

The  processes  of  iron  mining  where  ore  is  produced  on  a  Large  .scale  differ 
materially  from  those  of  coal  mining  or  the  mining  of  other  metallic  ores,  such 
as  gold,  copper,  lead  or  zinc.     The  most   noteworthy  iron  region  of  the  world 

i>  that  around  Lake  Superior,  in  which  the  three  states  of  Michigan,  Minnesota 
and  Wisconsin  yield  76  percent  of  all  the  36,000,000  long  tons  of  iron  ore 
produced  annually  in  this  country.  Minnesota  alone  contributes  over  15,000,000 
tons  ot'  the  product,  and  Michigan  follows  with  over  11,000,000.  Alabama 
is'  the  third  state  in  production,  yielding  more  than  3,500,000  tons  annually, 
and  then  follow  in  succession  Virginia  and  West  Virginia,  Tennessee,  Pennsyl- 
vania, Wisconsin  and  New  York,  ranging  from  1,000,000  tons  down  to  555,- 
000  tons.  The  other  sixteen  states  where  iron  is  found  commercially  yields  a 
total  product,  among  them  all,  of  1,695,000  long  tons.  Comparing  this  prod- 
uct with  that  of  other  great  iron  ore  producing  countries,  we  find  that  our  neaivsi 
competitor,  Germany,  produces  hut  18,000,000  long  tons  of  iron  ore  annually 
and  Great  Britain  1:5,500,000  long  tons,  the  Lake  Superior  region  alone  pro- 
ducing more  ore  than  either  of  these  countries. 

The  remarkable  iron  ranges  of  the  Lake  Superior  region  are  peculiarly 
available  because  of  their  proximity  to  the  great  lakes,  by  which  the  product 
may  be  shipped  directly  and  cheaply  by  large  steamers  to  the  manufacturing 
regions  of  Ohio  and  Pennsylvania  where  abundant  coal  is  found  and  where  great 
mills  have  been  built.  Three  distinct  iron  ranges  in  Michigan  have  been  recog- 
nized, all  in  the  upper  peninsula  and  trending  east  and  west.  These  are  the 
Marquette,  Menominee  and  Gogebic  ranges.  The  first  shipments  from  these 
deposits  were  made  in  1856.  Bessemer,  Ironwood,  Hurley,  Republic,  Cham- 
pion, Ishpuning,  Negaunee  and  other  towns  in  this  part  of  the  state  and  in  the 
of  Wisconsin  have  become  famous  the  country  over  for  the  remarkable 
mineral  wealth  they  have  yielded.  Escanaba,  Manistique,  Marquette  and  Ash- 
land are  the  shipping  ports  on  the  great  lakes,  from  which  this  product  is  sent. 

Two  iron  ranges  in  Minnesota,  the  Vermillion  and  the  Mesabi,  lying  north 
of  Duluth,  furnish  the  iron  from  this  state.  The  most  important  mining  points 
are  Ely,  Tower,  Virginia,  Hibbing,  Eveleth  and  Biwabik.  Their  shipments  are 
made  from  Duluth  and  Two  Harbors. 

Most  of  the  iron  ranges  of  the  Lake  Superior  region  can  be  worked  by  strip- 
ping of  the  surface  deposits  and  useless  vegetable  mould  and  worthless  mineral 
substances,  and  then  digging  the  available  ore  from  the  open  pits.  This 
becomes  quarrying  rather  than  mining,  as  the  word  is  generally  understood,  but 
though  it  may  lack  some  of  the  more  picturesque  features  of  mining  deep  in 
the  earth,  it  is  much  more  convenient  commercially,  and  makes  the  cost  of  the 
product  far  less  than  it  would  be  by  way  of  shafts  and  tunnels. 


THE  STEEL  TRUST. 


285 


The  brown  ore  is  carried  down  to  thu  Lakes  from  the  mines  in  an  almost  end- 
less succession  of  trains,  and  dumped  on  ore  docks  or  loaded  directly  upon  ves- 
sels waiting  for  it.  Scores  of  great  cargo  carriers  ply  from  these  ports  on  the 
upper  lakes  down  to  Lake  Erie,  carrying  their  store  of  Lake  Superior  iron  ore 
for  the  Pennsylvania  and  Ohio  furnaces.  This  single  industry  employs  a  very 
large  proportion  of  the  fleets  on  the  great  lakes.  At  the  other  end  of  their 
route  they  deposit  the  cargo  once  more  upon  the  docks  of  the  manufacturing 
town  or  into  the  railway  cars  that   are  to  carry  it  inland  to  smelters  and  blast 


From  the  United  States  Department  "t   Commerce  ami  Labor  Reports. 

MOUNT    IRON    MINE,    MESABI   RANGE,   MINNESOTA. 

The  Vermillion  range  in  Minnesota  was  opened  in  1884  I  not- 
withstanding Hi'-  fad  ih. it  tin-  ranges  are  farthest  removed  from  the  principal  pig  Iron 
producing  centers,  tin-  state  contributed  i;<  1902,  16,137.650  long  tons  ol  ■  "  •  r  amount 
than    was   produced    by   tin-   entire   country   according    to   the   previous   c<  The 

photograph   shows   two  stripping  ami   thr »re   levels.     Thi  "i    steam 

.    ,i   directly  mi   Iron  ore  cars,   in   which   it    is  hauled  to   the  docks      Tims 

Immensi    quantities  "i   ore  ■>><■  cheaply  and  easilj   obtained      Th<  irger  pro- 
n  pei  emploj  e  t  nan  those  "t  anj   othei 

furnaces.  Tin  processes  of  loading  and  unloading  these  cargoes  between  Bhip 
ami  train  have  become  bo  pert'. ded  by  tin-  use  "f  mechanical  appliances,  thai 
thousands  of  tons  maj  b<   handled  within  a  \er\   feu  hours. 

Th<  iron  and  steel  industries  of  Pennsylvania  -<>  far  lead  all  others  thai  a 
vieu  of  them  will  Berve  i<>  characterize  the  whole  country.  Annually  the  K>\ 
stone  -late  produces  sixtj  per  cent  <<t'  all  the  steel  of  Hie  United  States,  fifl\ 
per  lent  of  tin  pig  iron.  ;,,id  more  than  forty  per  cut  ol'  the  tin  plat.-.  The 
output  of  pig  iron  annually  approaches  18,000,000  tons,  »rith  a  value  of  more 
than  $50,000,000.     The  steel  output    is  over   10,000,000   tons,  and   the  total 


286  THE  STEEL  TRUST. 

value  is  about  $135,000,000.  Blasi  furnaces,  rolling  mills,  and  steel  mills  of 
everj  variety  help  to  bring  wealth  to  1 1  u-  state.  The  crude  iron  ore  as  it  comes 
from  the  mines  is  taken  through  all  the  accessary  processes  until  it  becomes  the 
finished  product  for  use  in  complicated  machinery,  for  bridge  building,  or  for 
building  or  railway  construction. 

The  ore  as  it  comes  from  the  mine  is  mixed  with  earth,  rock,  sand  and  other 
mineral  substances,  which  must  he  removed,  and 'the  first  form  it  takes  is  that 
o\'  pig  iron,  ready  for  the  foundry.  There  is  a  melting  room  in  which  is  a 
great  cupola,  cylindrical  in  shape,  standing  erect  like  a  huge  vertical  boiler, 
and  lined  with  fire  brick.  A  coke  fire  is  started  in  the  bottom  of  the  cupola, 
and  on  top  of  the  fire  is  dumped  a  mass  of  iron  ore  alternating  with  lime  and 
coke.  There  is  a  blast  pipe  beneath,  through  which  a  strong  draft  is  driven,  and 
a  stack  above  from  which  the  smoke  and  gases  escape.  The  metallic  iron  melts 
out  of  the  ore,  by  the  action  of  the  heat  stimulated  by  the  blast,  and  the  lime 
takes  up  such  impurities  as  cannot  be  removed  by  the  heat  itself.  The  metallic 
iron,  melting,  runs  to  the  bottom  of  the  cupola,  where  it  accumulates  in  a  liquid 
mass. 

The  floor  of  the  great  room  is  made  of  sand,  in  which  long  troughs  are 
marked  connecting  with  the  main  channel.  When  the  iron  is  all  melted  in  the 
cupola,  a  spout  below  is  suddenly  opened,  and  the  molten  mass  flows  out  in  a 
fiery  stream.  In  these  troughs  of  sand  it  cools  gradually,  and  is  broken  off  into 
proper  lengths  for  convenient  handling.      This  is  pig  iron. 

The  most  complete  manufacturing  plants,  however,  convert  their  iron  into 
steel  dinctly,  without  permitting  the  pigs  to  cool,  thus  saving  a  second  heating. 
Little  cars  lined  with  fire  brick  receive  the  melted  iron  and  carry  it  to  the  top 
of  another  cupola,  which  is  the  steel-converting  crucible.  This  is  an  even  hotter 
blast,  with  steady  currents  of  air  and  sometime,  oil  used  to  get  the  desired  heat. 
Carbon,  manganese  and  other  chemicals  that  produce  the  different  varieties  of 
steel  are  added  here.  When  the  process  is  complete,  to  produce  whatever  qual- 
ities are  desired,  the  contents  of  the  cupola  are  received  into  moulds  on  the  floor 
until  cool  enough  to  handle.      The  lump  of  metal   is  now  a  steel   ingot. 

If  it  is  intended  for  railway  rails,  the  moulds  are  picked  up  by  cranes  and 
tongs,  and  the  ingot  is  delivered  to  a  continuously-traveling  platform  or  bed 
with  projections  sticking  up  from  its  chains.  This  passes  it  into  the  grip  of  a 
succession  of  great  rollers,  through  which  it  is  squeezed  like  a  wet  cloth  through  a 
laundry  wringer,  continually  increasing  in  length  and  diminishing  in  thickness. 
At  last  it  takes  the  familiar  shape,  and  in  a  few  hours  from  the  time  it  left  the 
cupola  the  iron  ore  becomes  the  finished  railway  rail. 


CHAPTER    XXIV 

THE  COPPER   TRUST. 

Copper— The  Most   Valued  of  All  Minerals — Its  Use  as  a  Base  in  Supplying 
Electric  Power-    Ancient  Races  of  People  Used  Copper  in  the  Manufacture 
of  Weapons  and  Potter//— The  Tempering  of  It  Considered  a  Lost  Art 
Mines  Nearly  Five  Thousand  Feet  Deep   -Ladder-ways  into  the  Bowels  of 
the  Earth  a  Mile  Long. 


Strictly  speaking,  there  is  no  such 
thing  as  a  Copper  Trust,  though  the 
Amalgamated  Copper  company  which 
set  out  to  secure  a  monopoly  on  the 
copper  production  of  the  world  and 
failed,  is  understood  generally  to  be 
this  trust.  This  Amalgamated  Cop 
per  Company  stands  out  prominently 
before  the  American  public  for  m  \ 
era]  reasons. 

It  was  one  of  the  lirsl  attempts 
at  trust  financiering  on  a  gigantic 
scale  in  which  the  public  was  asked  to 
buy  an  enormous  amount  of  "water 

ed"    slock    at     100    cents    on    the   dollar 

for   the   benefil    of   the   money    kings 
w  no    duped    the    unsophisl  icated    in 
vestors  and  speculators.     It   i--  todaj 
a  shining  example  of  how   not  to  run 

a    trust     or    capitalize    a    corporation. 

For  at  its  inception  the  Amalgamated 
Copper  Companj    could   control   only   aboul    20   per  cent    of  the  copper   pro 
auction   oi    the   world,  and    \et    its   aim   was   lo  advance   the   price  ()|'  copper 
ncarlj    loo  per  cenl   and  hold  it   there  to  make  greal   profits  on  it-  "watered" 
and   extravagantly    overcapitalized   slock. 

I'    also   is   an   example   of   the    failure   even     of    the     well  nigh    almighty 


F.  AUGUSTUS   HEINZE, 

("      M  fully     struggled 

lopper  Ti  usi  and  si.  i 

ird    '  mi    mi'i. 


288  THE  COPPER  TRUST. 

''Standard  Oil"  party  to  carry  out  to  successful  conclusions  plans  which  mighf 
have  made  as  absolute  a  trust  in  copper  as  was  made  in  oil.  But  besides  these 
causes  for  public  interest  in  copper  financing,  Amalgamated  Copper  drew  the 

lire  ^A'  a  shrewd  stock  speculator-  Thomas  W.  Lawson  of  Boston — who, 
through  a  series  of  long-drawn-out  articles  on  "Frenzied  Finance"  published 
in  a  popular  magazine,  aroused  a  great  many  people  throughout  the  country 
over  what  purported  to  be  an  expose  of  the  "Standard  Oil"  "System,"  and 
especially  of  the  "Crime  of  Amalgamated." 

In  view  of  the  fact  that  Lawson  carried  his  attack  upon  "Standard  Oil" 
to  the  point  of  trying  to  induce  all  the  people  of  the  United  States  to  wreck 
the  country  by  withdrawing  all  their  savings  from  the  banks,  whether  for  good 
or  bad  it  did  not  matter,  makes  it  necessary  here  to  state  something  of  this 
so-called  "expose."  The  attack  began  in  the  summer  of  1904  and  was  carried 
on  monthly   for  a   long  period. 

Lawson  had  been  a  broker  and  did  a  i'ew  odd  jobs  for  the  "Standard 
Oil"  party,  among  other  things  advertising  in  a  sensational  manner  for 
"suckers"  to  buy  Amalgamated  Copper  stock  when  it  was  first  floated.  Be 
cause  of  the  methods  he  used  Lawson  could  not  keep  his  memberships  on  the 
several  stock  exchanges.  When  "Standard  Oil"  threw  Lawson  over  as  being 
"unsafe,"  the  Boston  stock  plunger  found  means  of  drawing  the  attention  of 
the  whole  American  public  to  the  vicious  business  ethics  of  the  "System." 
This  was  done  not  only  through  his  magazine  articles  on  "Frenzied  Finance," 
but  by  taking  advantage  of  the  publicity  thus  gained  to  announce  the  prob- 
able arrival  of  panics  as  the  result  of  his  crusade  against  the  Rockefellers, 
Rogers  and  other  financiers. 

It  took  only  a  short  time  for  Lawson  to  add  to  his  good  number  of  specula- 
tive followers  a  crowd  of  gamblers  who  would  bet  as  he  suggested.  Several 
lime-  when  the  Nc  u  York  stock  market  had  been  bulled  to  an  extravagantly 
high  price  and  all  sane  people  were  cautioning  against  such  excesses,  Lawson 
advertised  panic,  and  prices  broke  to  pieces.  Nearly  every  time  this  was  done 
Amalgamated  Copper  was  one  of  the  vehicles  of  attack.  It  is  creditably  sup- 
posed that  Lawson  made  big  winnings  out  of  the  gambling  operations,  though 
he  blatantly  offered  all  sorts  of  forfeits  if  any  one  could  prove  it. 

One  of  the  methods  used  to  force  a  panic  and  cause  people  to  lose  monev 
and  to  injure  business  was  to  send  telegrams  all  oyer  the  country  to  stock 
brokers  and  to  financial  editors  of  newspapers. 

WhiL  such  tactics  redounded  to  Lawson's  financial  interest  and  helped 
to  circulate  his  magazine,  they  were  of  some  positive  value,  perhaps,  in  arous- 


THE  COPPER  TRUST.  289 

ing  in  the  public,  which  now  was  crying  for  the  "square  deal,"  the  sense  of 
some  of  their  wrongs.  As  for  the  information  imparted  by  the  Lawson  dia- 
tribes there  was  nothing  which  financial  authorities  had  not  known  from  the 
time  "Standard  Oil"  tried  to  found  a  copper  monopoly,  and,  indeed,  nothing 
that  had  not  been  printed  over  and  over  again.  Even  the  Lawson  descriptions 
of  the  stock-watering  of  the  Amalgamated  Copper  Company  were  so  nearly 
like  those  given  in  the  Boston  News  Bureau  several  years  ago  that  they  sug- 
gested  plagiarism.      Nevertheless  the  effects  of  the  attacks  were  considerable. 

Leaving  Lawson  we  may  start  the  brief  history  of  the  attempt  to  form 
a  trust  in  copper  by  saying  that  when  the  "Standard  Oil"  party  set  out  to 
create  a  monopoly  John  D.  Rockefeller  was  not  one  of  the  men  of  the  party. 
The  mainstays  of  the  company  were  William  Rockefeller  and  Henry  II. 
Rogers,  both  of  them  oil  men  and  directly  associated  with  the  oil  king,  hut 
more  especially  known  for  their  financial  operations,  and  stock  market  deals. 
These  men  with  James  Stillman  of  the  National  City  Bank  and  others  brought 
together  the  control  or  outright  ownership  of  the  Anaconda  Copper  Company, 
the  Parrott  Silver  and  Copper  Company,  the  Washoe  Copper  Company,  the 
Butte  .V  Boston  Consolidated  Mining  Company,  the  Boston  &  Montana  Consoli- 
dated Mining  Company,  the  Colorado  Smelting  and  Mining  Company  and  the 
Big  Black  Foot  Mining  Company.  The  par  value  of  the  stocks  of  these 
companies  was  nearly  $48,000,000.  In  order  to  acquire  all  the  stock  issues 
of  four  of  them  and  mere  control  of  four  others  the  Amalgamated  Copper 
Company  floated  $155,000,000  of  stock,  considerably  over  $100,000,000  of  i' 
being  "'water." 

Now  at  the  time  this  consolidation  was  effected  not  to  operate  copper  mines 
hut  to  own  companies  that  did  the  copp.r  production  <•!'  the  world  was  about 
1,200,000,000  pounds  and  copper  had  been  raised  by  artificial  methods  to 
lsiL.  cents  a  pound,  whereas  tin  normal  price  was  about  l'i  cents  a  pound. 
It  was  the  desire  of  those  Irving  to  form  .i  trust  to  acquire  Buch  a  great  por 
tion  of  the  .locks  of  the  producing  companies  of  the  world  as  in  be  able  to  re 
itrid  supply  to  the  point  where  '.".'  cents  a  pound  could  he  secured.  'Tins 
entailed  the  probable  purchase  of  the  greal  Rio  Tinto  mines  of  Spain,  owned 
by  the  Rothschilds  of  European  financial  fame,  the  greal  Montana  copper 
properties  of  !•'.  Augustus  Heinze  and  his  associates,  and  perhaps  the  Calumet 
and  Hecla  of  Michigan  and  tin   Greene  properties  of  Mexico  and  Arizona. 

One  great  drawback  intervened.  This  was  the  bad  blood  between  the 
Amalgamated  party  and  the  Heinzt  part}  of  Montana.  Litigation  had  been 
in   progress  over  properties  that   were  in  dispute  of  ownership.     Without    the 


ggO  THE  COPPER  TRUST. 

control  of  tlir  rich  copper  district  of  Butte  the  trusl  would  fail.  The  two 
factions  understood  this  well.  Time  and  again  efforts  were  made  to  bring 
an  end  to  hostilities,  but  young  Heinze  knew  the  value  of  Ins  claims  and  so 
did  II.  II.  Rogers  of  •'Standard  Oil,"  only  the  latter  never  would  give  in, 
and  Heinze  was  just  as  full  of  fighl  as  his  opponents.  Litigation  ran  into 
legislative  bribery.  Newspapers  were  started  by  the  opposing  forces  in  order 
to  swing  public  opinion.  At  the  date  of  writing  this  fighl  still  is  in  progress 
and  Heinze  has  been  victor  in  many  of  the  suits. 

Without  the  control  of  the  Montana  copper  districts  or  the  alliance  of 
all  the  people  who  did  control  them  it  was  impossible  for  the  Amalgamated 
company  to  dictate  the  terms  at  which  other  concerns  should  sell  their  cop- 
per. The  Amalgamated  had  piled  up  something  like  200,000,000  pounds  of 
copper  in  the  attempt  to  push  the  price  up  to  22  cents.  But  this  did  two 
things,  it  threatened  to  check  copper  consumption  and  it  tempted  many  new 
producers  into  the  field.  Furthermore  one  of  the  richest  companies,  the 
Calumet  and  Hecla,  would  not  be  dictated  to.  Indeed  when  the  Amalgamated 
controlled  production  of  only  about  180,000,000  pounds  of  copper  a  year,  if 
was  suicidal  to  attempt  to  dictate  the  policy  of  American  concerns  that  pro- 
duced nearly  540,000,000  pounds.  Five  companies  that  were  rivals  to  this 
proposed  trust  alone  produced  about  half  as  much  again  as  the  Amalgamated. 
These  wore  the  Calumet  and  Hecla,  tin  Greene  Consolidated,  the  Rio  Tinto. 
the  United  Copper  and  the  United  Verde  Copper  Companies.  The  policy  of 
putting  up  the  price  of  copper  to  an  abnormal  level  resulted  in  an  enormous 
increase  in  the  production  of  copper  and  although  consumption  overcame 
tlii—  increase  it  was  only  after  the  Amalgamated  had  been  forced  to  sell  its 
accumulation  of  200,000,000   pounds  of  metal  at  a  great  sacrifice. 

This  of  course  made  the  operations  of  the  so-called  trust  unprofitable 
and  here  came  in  the  principal  sin  of  overcapitalization.  We  have  shown 
heretofore  that  a  promoter  in  starting  a  new  corporation  does  not  figure  so 
much   on    what   the   assets   of  the   company   COST   in   setting   a   limit   to   the 

'-.  of  the  concern  as  he  does  on  what  these  assets  will  EARN.  Now,  when 
the  stock  of  the  several  companies  thai  were  mergered  into  the  Amalgamated 
were  acquired,  either  in  part  or  in  full,  it  was  figured  that  the  Amalgamated 
could  pay  continuous  dividends  at  the  rate  of  8  per  cent  a  year  on  its  enor- 
mous  capitalization.  The  promoters  simply  figured  that  they  had  picked  up 
bargains  in  great  copper  properties,  that  they  could  pick  up  more  and  more 
until  a  monopoly  was  secured  and  then  continued  dividends  would  justify 
the  enormous  "watering"  of  the  stock.     Competent  critics  at  that  time  placed 


THE  COPPER  TRUST.  291 

the  intrinsic  value  of  Amalgamated  Copper^  shares  far  below  the  $100  a  shar< 
for  which  they  were  sold  through  public  subscriptions  to  the  "lambs."  And 
in  very  short  order  dividends  were  cut  from  8  per  cent  to  2  per  cent  a  year. 
Recently  the  price  of  copper  has  improved  and  the  dividend  on  Amalgamated 
Stock  has  been  put  back  part  way — to  -i  per  cent  a  year. 

The  most  serious  charge  against  the  "copper  trust,"  therefore,  is  that  it 
is  no  trust  (monopoly)  and  that  it  watered  it-  -lock  outrageously.  On  this 
score  the  Boston  News  Bureau  has  said:  "Its  intrinsic  value  is  $37.50  a  share, 
and  although  it  was  sold  to  the  public  at  $100  per  share  and  above,  then 
never  was  a  quotation  of  Amalgamated  that  did  not  show  the  "insiders"  :i 
profit.  There  were  cellars  and  sub-cellars  and  cellars  below  in  the  formation 
of  the  Amalgamated;  and  even  the  underwriters  who  made  more  than  $10  a 
-hare  out  of  the  flotation  have  realized  since  that,  instead  of  being  on  the 
ground  floor,  they  are  really  not  far  from  the  roof  upon  which  the  public 
was   landed." 

John  Moody  in  his  ''Truth  About  The  Trusts"  sums  up  the  mi-take-  of 
"Standard  Oil''  in  the  copper  field  thus:  "Could  the  plan  have  been  carried 
to  success,  and  a  practical  monopoly  secured,  instead  of  being  criticized  and 
condemned  on  every  hand,  as  it  has  been  for  several  years,  the  Copper  Trust 
would,  in  course  of  time  (if  not  by  this  time),  come  to  be  looked  upon  as  one 
of  the  mosl  brilliant  demonstrations  of  modern  business  mastery  and  success. 
In  the  place  of  being  pointed  at  as  a  speculative  fool  ball  and  gigantic  gam 
ble,  as  it  is  at  present,  it-  -lock  would  be  regarded  as  a  mosl  conservative  in 
vestment  security.  With  aggressive  and  efficient  business  management  then 
i->  no  logical  reason  why,  in  time,  it  could  not  have  assumed  -i  large  amount  of 
additional    '"water"    in    the    shape    of    new     capitalization,    and     \<t     rank    in    the 

public  mind  and  in  the  investment  field  with  corporal  ion-  a-  conservative  and 
sound  a-  the  \eu  York  Central  or  Pennsylvania  railroads.  Had  this  been 
the  case,  public  opinion  toward  the  trust  might  have  been  far  different  from 
udat  it  i-  today,  and  there  probably  would  have  been  no  occasion  or  oppor 
tunity  for  Buch  criticism  of  the  method-  of  the  trust  as  that  contained  in  a 
recent  magazine  issue  entitled  the  "The  Blind  Pool,"  b}   Mr.  Henrj  .  dr. 

••The  attempt  l<»  secure  Buch  a  monopoly,  however,  was  too  ureal  a  task 
even  for  these  giants  of  finance,  and.  chiefly  because  of  ii-  magnitude,  il 
broke  down  completely.  Whether  the  attempt  will  he  mad.  again  in  this 
generation  i-  problematical,  hut  it  seems  certain  that  a  time  will  com.'  in  the 
not  far  di-tant  future  when  its  feasibility  will  be  \'.w  more  demonstrable.  In 
present   outcome,   however,   i-  embraced   one  of  the   most    forcibk    demon 


THE  COPPER  TRUST. 

strations  given  in  this  generation  of  the  truth  that  no  combine  or  trust  can 
succeed  under  a  load  of  "watered"  capitalization,  unless  it  possesses  a  mono- 
poly (some  Legal  or  natural  advantage)  which  tends,  at  least,  to  offset  in 
value  the  amount  of  capitalized  water.  Trusts  without  water,  or  with  hut 
little,  are  sometimes  eminently  successful,  it  is  true:  hut  if  they  possess  no 
monopoly  element  they  are  successful  because  of  the  efficiency  of  their  service, 
and  only  because  of  that.  The  Copper  Trust  in  its  original  organization  was 
unfortunate  in  this  respect  :  its  prompters  made  the  mistake  of  giving  it  a 
monopoly  capitalization  before  it  had  secured  a  monopoly  possession.  It 
failed  to  secure  the  latter  and  therefore  succumbed.  The  successful  and 
businesslike  method  would  seem  to  he  the  reverse — possession  of  monopoly  first 
and    capital    expansion    afterwards.'" 

/,/  the  Bowels  of  the  Earth-    4,900  Feet  Below  the  Surface  of  the  Earth  in  <i 

Copper   Mine. 

ntists  tell  us  that  if  one  goes  deep  enough  into  the  earth  it  may  be  dem- 
onstrated that  the  center  of  this  world  of  ours  is  hot.  Most  experiments  to  prove 
this  have  been  made  by  lowering  automatic  thermometers  down  dee})  artesian 
wells.         But    in    the    deepest    copper    mine    in    the    world — the    Calumet    and 

II  da the  proof  can  he  had  by  contact  with  Nature  itself  in  honeycomb-like 

tunnels  that  burrow  through  the  bowels  of  the  earth  nearly  4,000  feet  below  the 
bottom  of  Lake  Superior.  When  one  remembers  that  this  body  of  water  it- 
self  is  1.000  feet  deep,  something  of  an  idea  may  he  conceived  of  the  life  of  the 
Cornish  miners  who  make  a  husiness  of  digging  copper  from  this  richest  and 
deepest  of  all  copper  mines  of  the  world. 

Hut  even  this  may  not  convey  a  definite  enough  picture  of  the  industry  that 
thrives  like  a  bee-hive  in  a  district  forty  miles  long  and  fifteen  miles  broad  in 
the  upper  peninsula  of  Michigan.  Dozens  of  elevator  shafts  pierce  this  dis- 
trict. Electric  locomotives  hustle  through  tunnels  and  men  push  their  carts 
along  long  galleries.  Here  electric  lights,  telephones,  pump  lines  and  fans  to 
keep  tin-  mine  clear  of  excessive  heat  or  gases  remind  one  of  the  modern  cori- 
\  qci  -  above  ground.  Indeed  thousands  of  men  here  live,  eat  and  work 
trer  the  center  of  the  earth  than  ever  before:  governed  by  law  after  the 
manner  of  villages  and  protected  by  fire  regulations  as  efficient  as  one  finds  in 
the  up-to-date  village. 

Entrance  into  this  great  human  hive  is  through  an  ordinary  shaft,  ordinary 
m  outward  appearance,  but  one  which  reaches  down  a  frightful  distance.       A 


THE  COP  PER  TRUST. 


29tf 


cable  guided  by  pulleys  from  a  huge  drum  extends  down  into  the  shaft  and 
lowers  cars  a  mile  deep  into  the  earth  or  raises  them,  at  a  moderate  speed  when 
there-  is  a  human  load  of  freight,  but  as  fast  as  a  mile  a  minute  when  copper 
ore  is  being  hauled  up  to  be  marketed  later  in  the  form  of  wire,  sheets,  tubes, 
etc.  So  fast  and  so  accurate  are  the  engine  and  the  engineer  that  operate  this 
cable  and   the   "'skips"    that    it    is  on   record   that   a   car  loaded   with   ten   tons   of 

ore  traveling  at  the  rate  of 
55  miles  an  hour  was  brought 
to  a  dead  stop  in  the  shaft 
in  a  distance  of  seventy-five 
fei  t 

When  the  "skips"  bring 
up  their  load  of  copper  ore 
from  the  mine,  they  art' 
dumped  automatically  into  a 
"breaker"  where  the  rock  is 
broken  up  in  sizes  small 
enough  to  go  to  the  mill. 
This  shaft  of  the  mini'  has 
six    compartments,    four    for 

I  raffic  and  one  for  cables  and 
pipes  tor  telephones,  electric 
light,  steam,  water  and  com 

pressed     air.        Another    com 
part  incut    has    a    ladder  w  ay 
extending   to   the   bottom   of 

(lie  mine.      This   is   for  s.ilVt\ 
in    case    of    a    break    in    the 
no.  2  pit,  adams  mini,  eveleth,  Minnesota.     1 1(  ,;st  ;„ ,,.      machinery.       This 

Showing   the   Incline   plant    bottomed    in   ore,    while  ..       . 

i,,    ,i,..    |,  ii    ,,t     ii,.    illustration    are    seen    the    tunnels  laddcr-wa\      a     mile     long     is 
tire    inn    back    in    i  he   <"  e       Minnesota    sho 

iid    practically   an    uninterrupted    advance  made     up     ol      many     ladders 

itpul    "t    i                     naturally    leads   to  - 

attention     "•    th<     record    "i     the    manufacture    ol     pig  uj||,     landing     places    so    thai 

metal        For    the    production    of    the    <i  n    ' 

metal  credited  to  th.     United  8taJ                    I  there  weri  ,,rkm«n       ma  \        rest       froing 

,i   nboul                                   ol    i"i  nil  •                     i  Hi-  ■                      ^        ^ 

'     which     •                 "'i    Into                      i  i                   comin.r   m, 

.,„.-   ,„iii„,.,   and   a    hall                                               '  "(,u  "    D1    coming   UP' 

In    addltioi                      ■  'I    fuel    about     18  I b  .,         . 

....  |{.  sides    '  he    cent  ral     vert  I 

■.,,,v    of   Ii                        re    fed    '  .      _          , 

iway  ii..-  impui  '     cal    shall,    then     an     sixteen 

• 

i  other-,    tin     loncest     incline- 

United    States    in    1902,    which    prod 

I,  ,n    beinc   sjiin   feel    I' 

« tons  of  raw  " 


From  tin-  United  States   Departmenl   "i   Commerce  am 

I. ,1mm    Reports. 


j!U  THE  COPPER  TRUST. 

reaching  down  to  a  depth  of  I.DOO  feet.  Roller-boys,  whose  work  it  is  to  keep 
tin.'  rollers  in  the  inclined  shafts  oiled  and  in  repair,  often  slide  down  the  cables 
to  save  time  in  going  into  the  depths  of  the  earth. 

Ever}  day  this  great  mine  can  produce  12,000,000  pounds  of  copper  rock 
and  it  nearly  always  is  working  full  capacity.  The  "skips"  dump  the 
rock  from  the  shaft  into  "grizzlies"  in  which  it  is  crushed  small  enough  to  fall 
through  to  railway  cars  by  which  the  rock  is  carried  away  to  a  place  four  miles 
awa\  where  it  i»  reduced  to  sand,  the  copper  extracted  and  the  powdered  rock 
raised  on  a  big  sand-wheel  and  dumped  into  Lake  Linden.  When  business  is 
very  heavy  the  cars  used  to  carry  the  miners  are  lifted  out  of  the  principal  shaft 
and  "skips"  are  put  in  their  place.  Thus  for  a  time  the  men  are  imprisoned  in 
the  bowels  of  the  earth.  The  mine  is  run  by  day  shifts  and  night  shifts,  so 
that  work  is  under  way  almost  constantly.  One  of  the  most  expensive  features 
of  this  mine  and  copper  mining  in  general  is  the  timber  work.  This  mine  com- 
pany uses  30,000,000  feet  of  lumber  a  year.  The  presence  of  so  much  wood 
makes  fire-fighting  appliances  necessary.  All  the  big  mines  are  thus  supplied. 
tire-doors  are  placed  in  various  parts  of  the  mines  so  that  they  may  he  closed 
when  lire  breaks  out.  The  timber  even  is  fire-proofed.  Electric  fire  signals  also 
are  in  use.  In  1900  a  had  fire  occurred  and  it  took  three  weeks  to  smotjier  it 
out. 

The  temperature  of  the  shaft  at  the  bottom  is  as  warm  as  that  on  the  sur- 
face in  summer.  The  walls  are  distinctly  warm  to  the  touch.  There  arc  fans 
at  the  surface  which  ale  used  to  draw  up  (had  air  and  fresh  air  rushes  down 
other  shafts  to  fill  the  vacuum.  Professor  Agassi/  of  Harvard  in  testing  the 
heat  of  the  temperature  in  the  Calumet  and  Ilecla  buried  a  number  of  record- 
ing thermometers  in  holes  drilled  ten  feet  into  the  rock  which  were  plugged  up 
with  clay.  Readings  were  made  every  three  months.  At  the  depth  of  4,500  feet 
the  temperature  was  found  to  lie  71)  degrees  Farenheit.  The  veins  of  copper 
in  this  mine  are  very  rich,  sometimes  pure  copper  being  found  in  such  big 
chunks  that   it   i-   not    profitable  to  chisel   it    in   pieces  small  enough  to  bring  to 


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—  V-  L- 

CHAPTER    XXV 
SOME   OTHER   BIG   TRUSTS. 

Tobacco  Merger — Whisky  Trust— Peoria  County,  Illinois,  Pays  One-fifteenth  of 

All  the  Government  Expenses  in  Internal  Revenue  Tax     Some  Trusts  That 
Went  Wrong-    The  Ship-building  Bubble — Men  Who  Fail     117///  Men  Fail 
(  (ml  Mining. 

Tobacco.— When  trusl   promoters  and  financiers  try  to  monopolize  a  business 

in  which  it  jn  easy  to  start  new  competition  tin-  trust  in  thai  industry  musl 
do  one  of  two  things,  either  absorb  all  the  competing  plant's  as  they  spring 
up,  or  settle  down  to  do  business  on  the  competitive  basis.  When  tin-  trusl 
starts  out  with  a  great  deal  of  "water"  in  its  stock  it  Is  pretty  hard  work  to 
do  business  on  the  latter  plan.  This  has  been  the  keynote  in  the  history  of 
the  Tobacco  Trust.  '•Watered"  from  the  beginning,  this  trusl  has  been  forced 
to  absorb  competitors  as  fast  as  they  arose  01  else  lose  its  grip  on  the  tobacco 
monopoly  both  in  America  and  Europe.  Hut  once  having  secured  about  *)i) 
pei-  cint  on  the  trade  in  American  and  about  50  per  cent  of  the  foreign  tradi 
the  Tobacco  Trust  has  been  able  to 
go  on  raising  prices  and  paying  divi- 
de ods  at  such  a  liberal  rate  that  in 
fifteen  years  it  has  been  able  to  in- 
crease it>  capital  from  about  $£5,- 
000,000  to  about  $600,000,000, 
much   of    it    •"water." 

Thi'  parent  company  of  the  To- 
bacco Trust  i-  tin  American  Tobacco 
company,  organized  in  1!)()l-  for  the 

purpose  of  "cutting  i Inn."  or  ad 

ding  about   $34,000,000  "water"  t<> 
tin     >tock    of    the    trust     which    had 
formerly    been    cont  roll*  d    by    other 
companies,  and  incidentally  of  merg 
ing   several   of   these  companies   into 

one    concern.         Before    that     lime    the 

principal  companies  of  the  trust  were 
the  Consolidated  Tobacco  company, 
American  Tobacco  company  (old ), 
( lontini  ntal  Tobacco  company  .  Am'  i 


ii 

A  CORNER  Or  A  VAULT  STORED  WITH 
RETIRED  BONDS  OF  THE  TOBACCO 
COMPANIES  ENTERING  INTO  A  MERGER 
UNDER  THE  NAME  OF  THE  AMERICAN 
TOBACCO  COMPANY.  EACH  BOND  REP- 
RESENTS   A    VALUE    OF    $1,000. 


SOME   <>TlIl-:i{  BIG  TRUSTS. 


it- in  Cigar  company,  American  Snuff  company,  Havana  Tobacco  company, 
British-American  company,  Ltd.,  American  Stogie  company,  International 
I  gar  Machinery  company  and  United  Cigar  Stores  company.  These  different 
companies  handle  different  branches  of  the  trade,  such  as  plug  tobacco,  cigar- 
ettes, snuff,  cigar  making  and  retailing,  etc. 

The  path  of  the  Tobacco  Trust  organizers  \\a-  by  no  means  an  easj   one. 
A-*    had    heen    indicated,    many    companies   entered    into    competition    in    order    to 


in    Harper's    Weekly.      Copyrighted,    1904,   by    Harper   ^    Bros. 

CLERKS  AT  WORK  ON  THE  DETAILS  OP  THE  TOBACCO  MERGER  CARRIED  THROUGH 
BY    THE    MORTON   TRUST    COMPANY. 

i  .it   work  <'p    the  details   of   the    merging   of   the   Consolidated   Tobacco   Company, 

Tobi lompany  .  nental  Tobacco  Company,   into  a  compact    corpora 

t i < i n  under  the  name  of  the  American  Tobacco  Company,  :it    the  offices  of  the  Morton  Trust 

Company,  New   York,  whose  president  is  Levi  P.  Morton,  former   Vice-President  of  the  United 

ties  of  this  corporation  amount   to  the  enormous  sum  of  $115!). 000, 000 

:es,  which   would   be  awkward   in  cases   involving   millions  of  dollars, 

; i   tl  rough   at   least   a   dozen   hands  and  processes  of  verification       Every 

o    i    oi   bonds  and  stock  had   to  bear  the  authentic  signature  of 

Moi  Trust  Company.     These  signatures   to  the  314,756  bonds  alone,  at 

nil   .!•■.    making   360   per   hour,   a    working-day   of  seven   hours   of  stead] 

work    uninterrupted    would    permit    oi    the   signature   of    63 seipts   and    the    entire   job 

i    in   about  two  and   one-half   months.     This   represents,    however,   only   a 
required,    for    if    did    not    Include    the    2,000,000    odd    shares    of 
todk  and  preferred  stock  nor  the  final   signatures  on   the   new   stock    Issued. 


tore  the  trusi  to  buy  them  out  at  a  fancy  figure.  From  a'modest  combination 
of  eastern  manufacturers  the  trust  grew  until  it  encountered  foreign  opposition. 
The  trust's  foreign  company  went  so  far  as -to  offer  its  entire  foreign  profit 
up  to  $1,000,000  a  year  to  foreign  retailers  if  they  would  buy  its  goods  for 
four   years.     This  was  made   to  counteract   offers  of  bonuses  by   foreign  con- 


SOME   OTHER  BIG   TRUSTS.  299 

cerns  to  such  foreign  retailors  as  would  undertake  not  to  sell  American  goods 

for  a  term  of  years.  The  outcome  eventually  was  for  a  settlement  whereby 
the  Tobacco  Trust  dominated  the  trade  of  nearly  all  the  world.  The  differ- 
ence between  the  Tobacco  Trust  and  the  so-called  Copper  Trust  is  that  the 
former  has  carried  out  its  program  and  the  latter  has  not. 

Sugar. — Of   all   the   trusts  there   is   non< unless   it    be   Standard   Oil      th.it 

is  run  on  more  of  a  "this-is-my-business"  sort  of  a  program  than  the  Sugar 
Trust.  And  well  may  it  do  so,  for  its  affairs  are  so  closely  woven  with  national 
politics  that  it  can  gel  almost  any  favor  it  likes  from  Congress.  Moreover,  in 
addition  to  these  special  privileges  of  high  tariff,  it  has  a  strong  enough 
element  of  natural  monopoly  in  the  control  of  raw  materials  to  dominate  some 
say.  as  high  as  90  per  cent,  of  the  sugar  trade.  This  trust  is  known  officially 
as  the  American  Sugar  Refining  company,  dominated  by  Henry  ().  Havemeyer 
and  capitalized  at  $90,000,000.  This  is  the  successor  of  the  Sugar  Refineries 
company,  and  though  it  does  not  control  absolutely  itself  the  monopoly  in  the 
raw  sugar,  refined  sugar  cane  and  beet  sugar,  through  its  many  ramifications 
it    practically    accomplishes    this   end. 

This  trust  was  not  without  its  competition  also.  In  1889,  shortly  after  lie 
formation  of  the  Sugar  Refineries  company,  Claus  Spreckels,  of  Philadelphia, 
Arbucklc  Hros.  and  Claus  Doscher  of  New  York  and  others  began  to  fight  for 
a  bigger  percentage  of  the  sugar  trade.  Prices  were  cut  again  and  again  l<> 
below  co>t.  Eventually  consolidations  were  effected.  Later,  when  beet  sugar 
began  to  be  manufactured  extensively  the  American  Heel  Sugar  company  aro  C 
in  hy  conclusions  with  the  trust.  For  several  years  it  operated  as  a  rival,  but 
the   trust    soon    bought    it    up. 

The  Sugar  Trust    has  been  eminently    successful   in  the  matter  of  paying 
dividends.      Hut    it    has  been   the   policy  of  the  company    never  to   issue    state 
merits  of  its  business.     In   Massachusetts  there  is  ;i   [aw    which   forces  anj   com 
I>.iii\    doing  business  in  that   state  to  present   a  ycarlj    balance  shed,  and  this 
tin    Sugar  Trust  does.     This  concession  to  tin    fan-  er\    for  publicity   b\  corpo 
rations    which    are   operated    upon    the   savings    of    the    public   discloses    little. 
! '      i < I •  ill   Havemeyer  objects  to  giving  information  to  his  stockholders  at  I  u 
on  tin   exact  financial  standing;  of  tin   trust   from  time  l<»  time,  lest  it  be  "giving 
to  competitors  information  about  corporate  affairs." 

s-i  i  tMSHip  Trust.  One  of  the  sorriest  examples  in  trust  financing  is  thai 
of  J.  IV  Morgan's  attempt  to  secure  a  monopoly  of  tin  sea  transportation 
between  America  and  Europe.  In  1902  just  at  the  culmination  of  tin  period 
of  most  successful  stock  "watering"  and  trust   making,   Morgan  and  his  allies 


300  SOME  OTHER   BIG   TRUSTS. 

incorporated  the  [nternational  Mercantile  Marine  company  with  authorized 
capital  and  bonds  of  about  $195,000,000  par  value.  This  company  was 
formed  as  a  consolidation  of  the  six  principal  transatlantic  steamship  lines,  the 
White  Star  Line  Red  Star  Line  American  Line,  Atlantic  Transport  Line, 
l.e\  land   Line  and   Dominion  Line. 

The  intention  was  to  absorb  the  Cunard  Line,  one  of  the  most  progressive 
of  the  steamship  companies,  hut  this  failed.  Here  was  a  weak  spot  in  the 
Morgan  plans.  At  once  the  Cunard  Line  took  measures  to  protect  its  business 
against  the  Morgan  combination.  Plans  wire  set  on  foot  to  form  an  anti- 
Morgan  combination  including  prominent  British  lines.  On  the  other  hand 
Morgan  reached  out  for  the  German  lines.  Then  the  Royal  Mail  Steamship 
Company  started  to  affiliate  with  the  other  British  lines  against  Morgan's 
project  and  a  Canadian  line  was  planned,  hacked  by  the  Canadian  Pacific  rail- 
way, looking  toward  the  same  end. 

About  this  time  there  arose  in  England  a  great  hubbub  over  the  effect  the 
trust  would  have  on  independent  lines  like  the  Cunard.  As  an  outcome  the 
British  government  gave  the  Cunard  Line  a  ship  subsidy  of  $750,000  a  year. 
Suhsidies  had  already  been  given  other  British  lines  in  the  trust  hut  the  British 
government  gave  notice  of  discontinuing  them.  Then  the  Cunard  Line,  which 
had  been  party  to  a  passenger  agreement  before  the  incorporation  of  the  trust, 
cancelled  it.  At  once  there  arose  a  war  of  rates  which  was  carried  on  for  some 
time. 

In  the  meanwhile,  even  before  the  underwriting  syndicate  which  took  charge 
of  $50,000,000  of  the  trust's  securities  had  finished  its  work,  the  prices  of  the 
Mercantile  Marine  stocks  and  bonds  began  to  fall,  therein'  causing  great  dis- 
content. The  work  of  the  underwriters  was  a  flat  failure  because  of  the 
approach  of  financial  stress  in  the  stock  markets  of  the  country.  Indeed  the 
$170,786,000  <-f  securities  issued  fell  in  price  to  about  $70,000,000,  showing 

a  decrease  of  $100,000,000.      What   the  outcome  of  the  Steamship  Trust    will   he 

is  problematical;  much  depends  upon  whether  the  Morgan  plans,  which 
obviously  were  not  carried  out  to  their  logical  conclusion,  will  he  revived  with 
better  results.  At  present  the  -real  fault  with  the  trust  is  its  lack  of  monopoly 
in    special    privilege. 

Trust      Under   this   title   are   embraced    interests   capitalized   at 

about    $800,000,000    which    treat    ores,    lead    bullion    and    copper   bullion,   operate 

mine.,    linseed    oil    works,    white    lead    works,    etc.      The    Standard    Oil    party    is 

rn-eath   interested  in  th(   trust,  hut  outwardly  the  great  family  of  Guggcnheims 

tin    leading  spirits.     Chief  of  the  companies  which  make  up  the  Smelting 


SOME   OTHER  BIG   TRUSTS  301 

Trust  are  the  American  Smelting  and  Refining  company  and  the  American 
Smelters  Securities  company,  both  officered  principally  by  the  Guggenheims. 
These  concerns  operate  the  principal  smelting  plants,  shot  towers  and  similar 
works  in  the  country,  besides  controlling  vast  mineral  resources  now  under 
development.  Closely  affiliated  with  these  are  the  American  Linseed  company, 
whose  business  is  the  manufacture  of  linseed  oil,  raw.  boiled  and  refined  varnish, 
oil  cake,  oil  meal,  and  crushed  flaxseed.  Working  in  harmony  with  the  fore- 
going are  the  National  Lead  company  and  the  United  Lead  company.  The 
history  of  the  Smelting  Trust  shows  excellent  profits  in  many  of  it-  branches. 
Here,  as  in  many  other  trusts,  there  was  the  attempt  to  discount  the  future  by 
piling  up  the  capitalization  to  unreasonable  heights,  but  in  view  of  the  fait 
that  these  concerns  control  the  industry  almost  to  the  point  of  monopoly,  their 
position  is  changing.  It  is  believed  now  that  it  would  take  a  very  powerful 
combination  to  enter  the  field  of  the  Smelting  Trust  with  any  degree  of  success. 
Whiskey  Trust. — Like  the  Tobacco  Trust,  the  Whiskey  Trust  has  seen 
a  great  deal  of  competition  and  in  order  to  secure  anything  like  a  monopoly  in 
its  field  it  lias  had  to  buy  up  man\  competitors.  Today  the  corporate  form  of 
the  trust  is  the  Distillers'  Securities  corporation,  with  $32,500,000  stock  and 
.-1  \.:>()  1.000  bonds.  This  company  controls  5)0  per  cent,  of  the  stock  of 
another  concern  the  Distilling  Company  of  America,  which  in  turn  controls 
the  several  companies  engaged  in  the  manufacture  of  spirits.  The  secondary 
company  is  well  loaded  with  -water."  having  out  over  $75,000,000  of  stock 
and    $2,580,000    bonds. 

One  of  the  reason-  why  the  Whiskey  Trust  has  a  moderate  monopoly  in  its 
field  of  business  is  that  it  has  certain  tariff  benefits.     To  ;,||  appearances  these 

benefits    com.-    because    the    government    gets    much    of    its    revenue    from    taxing 

whiskey,  spirits,  alcohols,  etc.     [ndeed,  Peoria  County,  Illinois,  where  si\  great 

distill.  ii.  >  of  the  trust  are  local,  d.  hands  over  from  $3  f. 000. 000  to  $36,000,000 
yearly  to  the  government  on  infernal  tax  payments.  This  alone  pays  about 
one-fifteenth   of   the   business  expenses  of   the   United    -  Peoria   County 

pays  the  government  enough  monej  to  build  a  warship  even  month.  The 
county  also  pays  enough  to  cover  the  expense  of  all  river  and  harbor  improve 

inents.       Its    contributions    form    a    highly     important    and    essential    pari     in    the 

matter  of  Uncle  Sam's  receipts  and  .nabl.    the  government  to  make  a  satis! 
tory  showing  on  the  income  sheet  each  year. 

Tin  largest  distillery  in  this  count  \  i>  the  Great  Western  Us  capacity  is 
65,000  gallons  of  spirits  a  day.  To  <>p,  rat,  this  on,  distillery  necessitates  the 
use  of  the  corn   from  four  hundred    ici       of  land.  lo  bushels  to  the 


308  SOME  OTHER  BIG  TRUSTS. 

acre.  It'  all  six  of  the  Peoria  distilleries  run  at  one  time,  it  takes  the  rut  ire 
product  of  1,000  acres  of  farm  land  to  supply  a  single  day's  material.  An 
average  of  2,000  barrels  of  whiskey  i>  made  each  day,  and  two  trainloads  are 
shipped  out  each  evening.     Probably  but  a  quarter  of  this  amount  is  disposed 

.it'  by  saloons  at  retail,  as  thousands  of  barrels  of  spirits  go  into  the  manu- 
facture of  smokeless  powder.  Immense  quantities  also  arc  used  for  compound- 
ing patent  medicines,  for  extracts,  for  essences^  in  the  arts  and  by  colleges  and 
schools   for  preserving  specimens. 

.More  gin  is  made  in  Peoria  than  at  any  other  place  in  the  world.  Juniper 
berries  are  imported,  distilled  with  spirits,  and  made  into  oin  in  immense 
(piant ities.  Whiskies  are  "aged"  in  short  order  and  are  "blended"  in  many 
ways.  In  fact,  anything  in  the"  drink  line  can  be  made  there,  but  the  basis  is 
always  honest  Illinois  corn.  In  one  month  the  rectifying  establishments  can 
turn  out   whiskey  that   purports  to  be  "SO  years  old." 

Some   Other   Trusts. 

Capital  and  Bonds. 

lian-Weber  Piano  and  Pianola  Co.,  "Piano  Trust" $  1(),()()(),()()() 

American   Agricultural    Chemical   Co.,  "Fertilizer  Trust" 40,000,000 

American  Brake-Shoe  &  Foundry  Co.,  "Brake-Shoe  Trust" 5,446,000 

Allis-Chalmers  Co.,  ".Machinery*  Trust" 50,000,000 

American  Can  Co.,  "Tin  Can  Trust" 88,000,000 

American  Caramel  Co.,  -Caramel  Trust" 2,400,000 

American  Car  &  Foundry  Co.,  "Car  Builders'  Trust'" 60,000,000 

American  Cement   Co.,  ''-Cement  Trust" 2,825,000 

American  Chicle  Co.,  "Chewing-Gum  Trust" 9,000,000 

American  Cotton  Oil  Co.,  "Cotton  Oil  Trust" 37,799,400 

American  Fork  &  Hoe  Co.,  "Farming  Tool  Trust" 4,800,000 

American  Glue  Co.,  -(due  Trust" ' 2,400,000 

American  Graphophone  Co.,  "Phonograph  Trust" 5,500,000 

American   Grass  Twine  Co.,  "Grass  Twine  Trust" 25,025,000 

American    Hide  &  Leather  Co.,  "Upper  Leather  Co." 42,837,000 

American    Hominy  Co.,  "Hominy  Trust" 4,271,000 

American   Ice  Co.,  "Ice  Trust" 41,970,000 

American  Locomotive   Co.,   "Locomotive   Trust" .""....  51,237,000 

American    Pneumatic   Service  Co.,  "Pneumatic  Tube   Trust," 16,600,000 

American   Malting  Co.,  "Malt  Trust" 33,810,000 

American    Radiator  Co.,  "Steam  Radiator  Trust" 10,000,000 

American   School   Furniture  Co.,  "School  Furniture  Trust" 11,500.000 

American   Seeding  .Machine  Co.,  "Seeding  Machine  Trust" 15,000,000 

American   Sewer   Pipe   Co.,  "Sewer-Pipe   Trust" 9,533,000 

American   Shipbuilding  Co.,  "Great  Lakes  Shipbuilding  Trust".  30,000,000 


SOMi:  OTHER   BIG   TRUSTS.  808 

American  Stove  Co.,  "Gas  Stove  Trust" 5,000,000 

American  Thread  Co.,  "Thread  Trust" 18,000,000 

American   Type  Founders  Co.,  "Type  Foundry  Trust" 6,900,000 

American   Woolen  Co.,  "Wool  Trust" 65,000,000 

American  Writing  Paper  Co.,  "Writing  Paper  Trust" 42,000,000 

Associated  Merchants  Co.,  "Dry  Goods  Trust" 20,000,000 

Borden's  Condensed  Milk  Co.,  "Condensed  Milk  Trust" 25,000,000 

Butterick  Co.,  "Paper  Pattern  Trust" 12,600,000 

Casein  Company  of  America,  "Milk  Sugar  Trust" 6,500,000 

Central   Leather  Co.,  "Leather  Trust" 125,000,000 

Central    Foundry   Co.,  "Soil    Pipe  Trust" 17,868,000 

Chicago  Pneumatic  Tool  Co.,  "Pneumatic  Tool  Trust" 9,800,000 

Cnn  Products  Co.,  "Glucose  Trust" 89,612,000 

Diamond  Match  Co.,  "Match  Trust" 5,250,000 

Distillers  Securities  Corporation,  "Whiskey  Trust" 1(6,761,000 

General  Chemical  Co.,  "Chemical  Trust" 25,000,000 

General   Electric  Co.,  "Electric  Supplies  Trust" 50,000,000 

Great  Western  Cereal  Co.,  "Oatmeal  Trust" fc,200,000 

[nternational    Harvester  Co.,  "Harvester  Trust" 120,000,000 

International    Nickel    Co.,    "Nickel    Trust" 34,000,000 

[nternational    Paper  Co.,  "PrinI    Taper  Trust" 62,000,000 

[nternational   Power  Co.,  "Compressed  Air  Trust" 125,000 

International  Silver  Co.,  "Silverware  Trust" 26,000,000 

[nternational   Steamship  Co.,  "Steam   rump  Trust" 36,000,000 

National   Biscuit    Co.,   "Cracker  Trust" 56,000,000 

National  Candy  Co.,  "Candj    Trust." 10,000,000 

\    tional   Carbon  Co.,  "Carbon  Trust" 10,000,000 

National  Car  Wheel  Co.,  "Car  Wheel  Trust" l.lol.ooo 

National  Enameling  and  Stamping  Co.,  "Stamped  Ware  Trust".  32,000,000 

National    Fircproofing  Co.,  "Terra   Cotta  Trust" 12,500,000 

National   Glass   Co.,  "Glassware   Trust"....  I  o.ooo.ooo 

National   Novelty  Corp.,  "Toy  Trust"  5,000,000 

Otis   Elevator  Co.,  "Elevator  Trust" ■•  l^oo.ooo 

Pullman  Co.,  "Palace  Car  Trust" ",  ..oou.ooo 

Quaker  Oats  Co.,  "Cereal  Trust" 3,000,000 

Railway   Steel  Spring  Co.,  "Car  Spring  Trust  I  ^00,00 

Royal  Baking  Powder  Co.,  "Baking  Powder  Tru  t"  20, 000,000 

Standard   Milling  Co.,  "Flour  Milling  Trust" '  ^00,000 

Union   Bag&  Paper  Co.,  "Paper  Bag  Trust" ... .  noo.ooo 

t-    •        nn             t       c       ~'\\  Mu.it,  ,•   Trust"  20,000,000 

I  iiinn    I  \  pew  nter  <  o.,      I  \  pew  ritci     i  i  u»i    

United    Bo:    Board  &    Paper  Co.,  "Strawboard  T  31,000,000 

United    Fruii    Co.,  «F rail    Trust" £00,000 

United   Shoe  Machinery  Co.,  "Shoe  Machine^   TniHt"  25,000,000 

United  Stati  «  Casl    Iron  Pipe  and  Foundry   < 

......  :1 1  ..iOII.ikh) 

I  rust     


:;,»i  SOME   OTHER   BIG   1  RUSTS. 

I.   S.    Envelope  Co.,  "Envelope  Trust"    7,228,000 

I      S.  Gypsum   Co..  "Gypsum   Trust" 8,500,000 

l'    S.   Realty    &    [mprovement    Co.,    "Skyscraper    and    Building 

Trust" 60,000,000 

!'.   S.   Rubber  Co.,  "Rubber  Shoe  and  Goods  Trust" 50,000,000 

I  .  S.   Bobbin  &  Shuttle  Co.,  "Bobbin  and  Shuttle  Co".. 2,000,000 

\  irginia-Carolina  Chemical  Co.,  "Phosphate  Trust" 64,500,000 

VVestinghouse  Properties,  "Electrical  Supply  Trust" 48,000,000 

Some  Trusts  that   Went   Wrong. 

There  arc  many  examples  of  trusts  that  have  not  been  successful  because 
they  did  not  have  enough  of  the  monopoly  in  their  particular  industry  or  a 
special  privilege  of  some  kind  great  enough  to  insure  profits  on  the  great 
waves  of  "water"  that  were  injected  into  the  capital  stock.  Some  of  these  so- 
called  trusts  have  been  forced  to  reorganize  time  and  again.  Recently  several  of 
these  were  put  through  the  process  of  "scaling  down"  their  stocks  and  bonds, 
that  is  squeezing  the  "water"  out  of  the  inflated  capitalization,  in  order  to 
exist  at  all.  Among  these  a  recent  example  is  the  United  States  Realty  and 
Construction  company,  or  the  Realty  or  Building  Trust,  which  builds  and 
own-  many  great  skyscrapers  and  which  had  to  reduce  its  $66,000,000  of 
capital,  which  sold  as  low  as  $16,000,000  in  the  market,  down  to  $1 6,000,000 
stock  and  $13,000,000  bonds  of  a  new  company,  the  United  States  Realty 
and    Improvement    company. 

The  American  Malting  company,  or  Malting  Trust  is  another  example. 
It  started  out  with  about  $25,000,000  stock,  and  later  increased  this,  paid 
dividend^  when  they  wen-  not  earned,  piled  up  a  big  debt  which  was  hidden 
for  a  time  by  alleged  erroneous  entries  in  the  company's  books  and  eventually, 
through  suits  by  stockholders,  forced  directors  to  repay  the  dividends  im- 
properly  declared. 

The  Genera]  Asphalt  company  or  Asphalt  Trust,  celebrated  because  of  its 
political  troubles  in  South  America  where  it  controls  great  asphalt  beds  the 
ownership  of  which  is  disputed  by  South  American  politicians,  is  another  trust 
that  went  wrong  and  had  to  !>.•  reorganized.  This  trust  started  out  as  the 
Asphalt  Company  of  America  with  $30,000,000  stock  and  $30,000,000  bonds 
and  with  glowing  promises  of  big  dividends.  This  company  was  to  take  over 
;i   number  of   prominent   asphalt   and    paving  concerns   which  bid  fair  to  do  a 

d  busing  undo-  the  consolidation.  Hut  the  American  company  could  not 
pay  ;ill  its  bond  interest,  to  say  nothing  of  dividends.  So  the  National  Asphalt 
Company  was  organized  to  acquire  the  Asphalt  Company  of  America  and  other 


SOME  OT II EN  BIG   TRUSTS.  305 

concerns.  This  company  had  $6,000,000  bonds  and  $22,000,000  capital. 
This,  however,  was  not  profitable  and  the  companies  went  into  the  hands  of  a 
receiver.  This  crash  was  due,  it  is  said,  to  a  loss  of  Large  paving  contracts 
in  several  cities  and  to  the  expensive  war  waged  for  the  pitch  lake  in  Venezuela 
known  as  La  Felicidad.  Under  the  receivership  it  was  learned  thai  enormous 
overvaluations  had  been  placed  on  various  plants  absorbed  by  the  trust  in  order 
to  "water"  the  stock.  In  one  case,  the  Columbia  Construction  company,  which 
cost  $250,000,  was  paid  for  with  an  issue  of  $2,000,000  of  bonds.  Much 
litigation  followed,  but  ultimately  the  Genera]  Asphalt  company  was  forced  to 
hike  over  the  other  concerns,  squeeze  out  "water"  and  try  it  all  over  again. 
The  capital  of  the  new  company,  par  value,  is  $31,000,000. 

Of  all  the  recent  financial  bubbles  blown  and  burst  that  of  the  Shipbuilding 
Trust,  of  the  United  States  Shipbuilding  company  as  it  was  Legally  known, 
was  tla  most  calamitous.  The  ostensible  object  of  this  company  was  to  buy  up 
the  principal  shipbuilding  companies  of  the  United  States  economically  and 
earn  great  profits.  It  appears,  however,  that  the  real  object  was  to  sell  a 
flood  of  '"watered"  stock  to  an  unsophisticated  public,  wreck  the  trust  and  Live 
serenely  ever  after   with    the   wealth    thus   made   in   a   night. 

The  charges  and  countercharges  made  against  the  promoters  of  this  trust 
when  it  went  into  the  hands  of  a  receiver  sullied  some  of  the  proudest  nanus 
in   American   finance. 

Briefly,  the  company  started  with  $20,000,000  capital  and  $9,000,000 
bonds  to  acquire  plants  which  other  promoters  had  figured  on  capitalizing  a' 
$63,000,000.      Thus    il    appeared    thai    the   financing   was   conservative.      Bui 

il     was    not.       Very    soon    il     was    announced    that     the    company     would    bu\ 

gnat  Bethelehem  Steel  company,  owned  by  Charles  M.  Schwab,  protege  of 
Andrew  Carnegie  and  first  president  of  the  Steel  Trust.  This  plan  necessitated 
new  capital.  This  Bethlehem  Ste.l  company  was  capitalized  at  $15,000,000, 
pai-  value  $50  of  which  only  $1  a  share  had  been  paid  in.  Il  guaranty 
per  cent,  on  $7,500,000  of  the  stock  of  Hie  Bethlehem  tron  company,  which 
it  had  leased  for  999  years.  This  Bethlehem  Steel  company  owed  al  the  time 
the    Shipbuilding   company    purchased    \\  ,000.      This    indebtedness    the 

Shipbuilding   company    assumed   and    then    paid    for   the    Bethlehem   company 
1,000,000    in    stock   and   $10,000,000   In   bonds.     This   brought    the  trust's 

capital    up    to    nearly    $80,000,000. 

In  a  very  short  time  it  developed  that  thi  Ti  i  pan}  of  the  Republic 
of  New  York  City,  which  was  the  principal  underwriter  of  the  bond-  of  the 
company  offered  for  Bale,  had  to  fail.     Thu  :  to  b<   due  to  the  failure 


906  SOME  OTHER  BIG  TRUSTS. 

of  French  subscribers  to  the  bonds  to  stand  by  their  purchases.  Hut  shortly 
;t  appeared  thai  the  trust  could  not  earn  wli.it  it  had  said  it  could.  In 
order  to  secure  the  Bethlehem  company  Schwab  had  been  given  the  right  of 
voting  on  the  $10,000,000  bonds  paid  him  besides  the  voting  right  of 
$20,000,000  stock.  The  total  stock  issue  of  the  trust  was  $45,000,000,  so  that 
Schwab  had  gained  actual  control  of  the  whole  company  when  selling  his 
Bethlehem  plants. 

Now.  the  trust  depended  upon  the  Bethlehem  plants  to  earn  money  and 
pa\  it  over  in  the  shape  of  dividends  so  as  to  net  the  trust  a  profit.  What 
actually  happened  was  that  Schwab's  agents  in  control  of  the  Bethlehem  com- 
pany, through  being  in  control  of  bonds  and  stocks  of  the  trust,  made  great 
special  expenditures  and  refused  to  pay  dividends  when  demand  was  made 
upon  them  by  Lewis  Nixon,  president  of  the  United  States  Shipbuilding  com 
panv.  Collapse  came  very  soon.  All  sorts  of  exposures  came  when  the  trust 
went  into  the  hands  of  a  receiver.  Among  other  things  it  was  charged  that 
the  prospectus  of  the  company  when' its  securities  were  floated  was  misleading, 
to  say  the  least.  Seven  plants  alone  on  the  books  of  the  trust  when  they  were 
opened,  vain,  d  at  $3,278,798,  were  revalued  at  $1,828,431,  every  plant  showing 
a  reduction  and  all  showing  a  reduction  through,  overvaluation  of  $1  ,45(),Jifi7. 
The  Bethlehem  Steel  Corporation  eventually  succeeded  the  bankrupt  trust, 
having  $30,000,000  stock  and  $3,000,000  bonds. 

At  the  time  of  the  receivership  of  this  trust  the  New  York  Evening  Post 
printed  two  editorials  which  expressed  public  opinion  at  that  time  quite  accu- 
rately.    One  wound   up   with   this  rebuke: 

'•Th>  question  i-.  whether  paper  inflation  of  this  sort  was  the  kind  of  busi- 
ness in  which  the  gentlemen  had  any  right  to  be  engaged.  As  the  affairs 
turned  out,  effort-  to  foist  the  shipyard  shares  on  the  public  very  generally 
failed.  It  did  not.  however,  fail  for  the  want  of  false  statements  to  the  pub- 
lic. What  we  feel  bound  to  ask  is,  what  Mr.  Schwab  would  have  done  with  his 
sl  o.ooo.OOO  common  and  $10,000,000  preferred  if  the  fish  had  swallowed  the 
bait.  Let  US  imagine  the  simple  public  bidding  for  shipyard  stock  at  a 
valuation  fixed  by  belief  in  the  organizers'  prospectus;  what  then?     To  us  the 

•  serious-  thing  about  the  whole  financial  scandal  is  the  easy  conscience 
which  it  shows  financiers  in  places  of  great  trust  to  have  possessed  in  their 
attitude  toward  the  public.  It  is  conceivable  that  Mr.  Schwab,  like  many 
others  of  our  newly  made  'multi-millionainw',  shares  in  the  lite  delusions  regard- 
ing paper  capital  and  really  believed  that  riches  could  be  got  overnight,  with- 
out hurting  anybody  else  by   merely  substituting  thirty  for  nine  millions  in  a 


SOME   OTHER   BIG   TRUSTS.  807 

balance  sheet.     But   this,   we   must    confess,   is  a  sort   of  simplicity   which  we 
should  greatly  regret  to  see  in  the  practical  leaders  of  American  industry." 

The  other  editorial  was  a  comment  on  the  career  of  the  late  Whitaker 
Wright  of  London,  who  had  robbed  the  public  right  and  left  through  stock 
jobbing  methods  and  when  sentenced  to  imprisonment  had  committed  suicide 
in  the  courtroom.     This  comment  ran: 

"No  man  who  examines  his  career  can  resist  the  conclusion  that  he  was 
guilty,  first  of  dishonesty,  secondly  of  being  caught.  He  obtained  money  for 
what  was  worth  little  or  aothing,  and  he  was  overtaken  by  the  detectives  from 
Scotland  Yard.  In  point  of  essential  morality,  however,  his  case  differs  in  no 
respect  from  that  of  the  promoters  of  the  Shipbuilding  Trust — to  take  one 
striking  modern  instance.  That  buccaneering  cruise  into  the  sea  of  public 
credit  began  with  a  prospectus,  which,  like  Wright's,  was  stuffed  with  lies. 
The  capital,  as  in  Wright's  companies,  contained  much  water;  that  is  paper 
certificates,  entitling  the  holders  to  their  portion  of  nothing.  The  promoters 
wire,  as  iii  Wright's  corporations,  to  receive  a  lion'-  share:  and  hard  and  fast 
agreements  were  drawn  to  enable  the  insiders  to  pocket  their  profits  and  clear 
out  earlv  in  the  game.  The  Shipbuilding  Trust,  like  the  London  and  Globe 
Company,  relied  upon  names  of  nun  who  were  supposed  to  embody  our  highest 
commercial  ideals.  Hut  there  is  one  vast  difference  between  the  case  of  Wright 
and  that  of  some  of  our  leaders  of  high  finance;  he  was  amenable  to  the  severe 
English  Companies'  law.  He  transgressed  it.  lie  paid  the  penalty;  and  a  thou- 
sand preachers  will  use  hi-,  fate  as  a  text.  Our  transgressors  of  the  same  moral 
law  walk  in  the  \'\-(f  air.  lavish  in  their  philanthropies,  lauded  from  the  pul- 
pits as  examplars   for  our  youth." 

Men   Who  Fail. 

It   i^  a    pel    saying  in  commercial  circles  that   95  per  cent   of  all   nun   who 
embark    in   business   fail.     This   is  not   correct.      ,\   great    mam    people  do  not 

make     a     SUCCCS8     of     their     hi|sines>     propels     hut      people     who     fail,     that      is 

Fail  lo  pay  their  legal  debts,  in  ••!   period  of  25  years   never  amounted  to  more 
than   1'      per  cent   of  those  in  business.     Sometimes  the  a\  a  a-  lov 

nthfl  of  mie  per  cent  of  those  in  busi 
The  following  figures  compiled  l»v  Bradstreet's  Journal  arc  the  proof: 

Numb<  r  Number  Per  <  '<  nt . 

in  husim  failing.  failii 

1903  1,273,000  9,71 

i '.)<>■•  i.  9,971  .80 

1901  l.''  I<>. i.  ,88 


$08  SOME  OTHER  BIG  TRUSTS. 

1900  1,161,000 

1899  1,125,000 

L898  1,093,000 

1897  1,086,000 

1896  1,080,000 

1895  1,054,000 

1894  1,047,000 

1 898  1 ,050,000 

1892  1,085,000 

1891  1,010,000 

1890  989,000 

1889  978,000 

1888  955,000 

1887  933,000 

1886  920,000 

1885  890,000 

1884-  875,000 

1883  855,000 

1882  820,000 

1881  780,000 

1880  733,000 

1879  703,000 

The  kind  of  failure  which  means  failure  to  succeed  in  business  is  not  so 
accurately  tabulated.  But  the  same  authority  shows  that  in  1803  there  were 
284,893  names  erased  from  Bradstreet's  record  while  322,006  new  names  were 
added.  Some  of  these  that  retired  doubtless  failed  outright;  others  failed  to 
succeed,  and  others  probably  branched  out  in  the  new  business  reported.  The 
significant  thing  about  these  business  failure  statistics,  however,  is  that  the  old 
commercial  proverb  quoted  above  is  proved  erroneous. 

Why  Men  Fail. 

All  business  men  watch  with  a  great  deal  of  interest  the  figures  that  are 
announced  from  time  to  time  by  credit  guide  companies  concerning  the  failures 
of  business  nun  or  corporations.  This  is  one  of  the  principal  guides  to  sound 
business,  for  in  the  aggregate  these  figures  show  the  tendency  of  business  con- 
ditions tt)  improve  or  decline  and  individally  they  show  what  men  have  failed 
and  what  localities  are  suffering  most  from  bad  business  methods.  When  it  is 
said  that  during  1904  there  were  10,417  individuals,  firms  and  corporations  who 
suspended  business  owing  to  outside  creditors  and  who  owed  more  than  they 
could  pay  and  that  these  businesses  had  $75,691,332  of  assets  and  almost  double 


9,913 

.85 

9,634 

.85 

1 1 ,638 

1.06 

13,099 

1.20 

15,112 

1.40 

13,012 

1.23 

12,721 

1.21 

15,560 

1.50 

10,270 

1.00 

12,394 

1.22 

10,673 

1.07 

11,719 

1.20 

10,587 

1.10 

9,740 

1.04 

10,568 

1.15 

11,116 

1.25 

11,600 

1.32 

10,299 

1.20 

7,635 

.93 

5,929 

.76 

4,350 

.60 

6,652 

.94 

SOME  OTHER  BIG  TRUSTS.  309 

the  amount  of  debts,  or  SI 43,648,35] .  it  will  be  seen  how  important  a  matter  is 
up  for  consideration  by  the  business  man. 

The  authority  quoted  in  foregoing  says  there  are  eleven  separate  and  dis- 
tinct causes  for  failures,  grouped  under  two  genera]  classes.  Under  the  first 
classification  are  those  failures  the  causes  of  which  are  traceable  directly  to 
those  failing;  under  the  other,  the  causes  over  which  the  suspending  trader 
could  not  have  exercised  absolute  control. 

Following  is  the  summary : 

A. — Due  to  Faults  of  Those  Failing. — (1)   Incompetence,   (irrespective  of 
other  causes);   (2)   Inexperience,   (without  other  incompetence);   (:})    Lack  of 
capital;    (-i)    Unwise  granting  of  credits;    (5)    Speculation,    (ontsid,.    regular 
business);  (6)  Neglect  of  business,  (due  to  doubtful  habits);  (7)   Persona]  ex 
travagance;  (8)   Fraudulent  disposition  of  property. 

B. — Not   Due   to    Faults   of   Those   Failing — (9)    Specific   conditions,    (dis 
aster,  etc.);   (10)   Failures  of  others,   (of  apparently   solvent   debtors);   (11) 
•Special  or  undue  competition. 

Coal  Mining. 

Not  only  does  the  mining  of  mineral  wealth  in  this  and  other  countries  pro- 
duce great  wealth  but  it  is  one  of  the  principal  occupations  of  labor.  Of  coal 
alone  the  world's  production  in  short  tons  is  about  850,000,000  tons  annually. 
Let  us  follow  some  of  the  processes  of  mining. 

Coal  having  been  located  in  paying  quantities  by  prospecting  and  geological 
surveys,  the  nexl  step  is  to  extract  the  coal  from  its  "seams."  There  are  mam 
different  methods  all  looking  to  securing  the  greatest  amount  of  marketable  coal 
with  the   least   expenditure  of  labor  and  other  expense.     Generally   speaking, 

however,  there  are  two  kinds  of  coal  mining:  open  and  closed.  Open  working 
i-  used  when  there  is  no  over  "burden"  of  rocks  or  barren  earth,  or  where  it  is  so 
small  that  it  can  he  removed  easily,  disclosing  the  coal  veins.  Then  the  work 
is  really  only  quarrying  or  open  excavation  and  machines  for  tins  kind  t)\'  work 
are  used.  Closed  working  is  used  where  the  "burden"  of  rock  and  earth  is  so 
heavy  that  the  work  has  to  be  done  underground.  This  is  the  kind  most  generally 
known. 

The  first  thing  to  be  done  is  to  gain  access  to  tin  coal  "m  ams"  by  means  of 
shafts,  slopes  or  tunnels,  shafts  are  vertical  openings  from  the  Burfaa  ■•('  tho 
ground  to  the  "seam."  In  this  country  shafts  mostly  are  square  and  lined  with 
timber  work.  In  Europe  many  of  them  are  round  or  oval  and  lined  with  brick. 
iron  or  masonry.    The  number  of  shafts  depends  upon  the  characti  r  <>t'  the  mine, 


.C  to 


SOME  OTHER  BIG  TRUSTS, 


an 


hut  usually  each  shaft  has  two  or  more  compartments  in  each  of  which  is  fitted 
an  elevator  for  lowering  and  hoisting  coal-cars  to  and  from  the  mine.  In  deep 
mine>  fewer  shafts  are  sunk  than  in  shallow  mines.  One  of  the  Largest  coal-mine 
shafts  in  the  world  is  situated  at  Wilkesbarre,  Pa.,  and  is  1,089  feet  deep,  12  x 
52  feet  in  size  and  has  five  compartments. 

Slopes  are  openings  begun  when  the  coal  seam  crops  out  in  the  shaft 
from  an  inclined  direction.  These  also  generally  have  several  compartments,  most 
often  with  three,  two  for  hoistways  and  a  third  for  a  traveling  way,  piping,  etc. 


From  the   L'nited   Stati      Departmi 


m.i   Labor    Reports 


TROLLEY    ELECTRIC    LOCOMOTIVE    IN    COAL   MINE 

lO    m  R<  ii.  nil    i. 

lating   i  hal    1 1  ■ 
and   .Mill  '"iilt 

Mod<  in   m 
ding   to   Up-   work   1 1  ■ 
and    theli  .  : '  "in    i s    Ini  hea   to   i 


Slopes  sometimes  use  cages  and  usually  are  lined  with  limber.  Tunnels 
nearly  horizontal  passageways  extending  vini.dU  from  a  hillside  into  the  earth 
t.,  meet  a  scam  of  coal.  These  are  built  much  like  railway  tunnels.  The  timber 
work  in  minis  needs  to  be  watched  carefully,  for  sometimes  it  breaks  without 
warning  and  buries  the  miners  alive.  Often  th<  timber  used  is  treated  with  some 
preservat  ive. 

W" Ik  m     ■  secured   to  the  coal  il   methods  of 

working  them.     Th<  bc  are  called,  long  wall,  room  and  pillar,  pillar  and  chambt  \\ 


SOME  OTHER  BIG  TRUSTS. 


From  the  United  States  Department  of  Commerce  and   Labor  Reports. 

ELECTRIC   COAL    CUTTEB. 

The  evolution  of  the  chain  machine  for  coal-cutting  was  one  of  the  most   notable  steps-   - 
practically    the    final    step     in    the   development    of   a    successful    mining    machine.       the 

i   with   which   it   can   do  its   work   seems   in,  ,.,|  i  hie.     One  of  these  machines  has  a  record 

.....  squ;  ..    feet   in  nine  and  one-half  hours,     a   fair  average  for  such  a   machine 

.    cutting  •  of  coal  every  eight  hours.     Then,  is  a   saving  of  26%  cents  per  ton 

of  machine  mining   for  pick   mining  in   rooms.     As  the  height  ot  the  ma- 

■       it  can  be  operated  in  very  thin  veins. 

board-and-pillar,  etc.  The  two  principal  methods  are  mining  along  the  wall  of 
the  seam,  taking  every  bit  of  coal  out  and  allowing  the  roof  to  settle  down,  and 
that  of  cutting  out  rooms  or  chambers  and  leaving  pillars  of  coal  to  support 
the  roof.  In  America  machinery  is  used  extensively,  although  there  is  much 
cutting  by  hand.  There  are  four  principal  styles  of  machines,  pick,  chain- 
cutter,  cutter-bar  and  long-wall  machines.  Pick-machines  are  similar  to  a 
rock-drill.  Chain-cutting  machines  are  devices  by  which  a  chain  hearing  cutting 
th  i-  run;  this  i>  worked  by  a  motor  against  the  wall  of  coal.  Compressed  air 
and  <  lectricity  are  used  to  operate  machinery  in  the  mines,  and  mechanical  ventila- 
tion by  mean-  of  fan-  and  blowers  is  employed  to  free  the  mines  of  gases. 

In  order  to  get  the  coal  to  the  surface  there  either  is  a  hoisting  engine  that 
lift-  the  coal  in  a  cage  regardless  of  any  balance  or  a  device  by  which  the  car 
then  going  down  into  the  mine  helps  to  lift  the  ascending  cage.     In  the  mines 


SOME  OTHER  BIG  TRUSTS. 


318 


animals,  generally  small  donkeys,  are  employed  to  haul  the  coal  cars  which  run 
through  the  tunnels,  though  machinery  here  also  is  used  to  sonic  extent,  such  as 
locomotives  operated  by  steam,  compressed  air,  electricity,  gasoline,  etc.  The 
excavations  for  coal  mines  run  to  an  extent  almost  inconceivable.  Almost  tha 
whole  city  of  Wilkesbarre,  Pa.,  to  say  nothing  of  Scranton  and  other  places,  is 
undermined.     The  mines  even  go  under  the  beds  of  rivers. 

When  the  coal  is  brought  out  of  the  mine-,  before  it  can  go  to  market  it  musi 
be  prepared  by  being  screened  over  bars  and  through  revolving  or  shaking 
screens.  ( >ften  it  must  be  broken  over  heavy  rolls  to  make  it  the  desired  market  size. 
When  the  coal  contains  much  sulphur  it  is  washed.  Often  Lumps  of  slate  appear 
in  the  coal  and  to  remove  this  and  similar  impurities  boys  and  old  men  are  em 
ployed  to  sit  along  the  chutes  leading  to  bins  and  pockets  and  separate'  this  refuse 


EProm  the  United  State     Department   of  Com  mi  i    iboi    Re| 

ELECTRIC   DRILL  AT  WORK  IN  A   MINX. 

>a1   mlnln  mmon, 

and   app<                      I  horoughl  ■  d    foi    i""  Ing                        the 

coal  foi   shooting  it  down  aft  been  undercut                                                                     n  be 

■  i  at    iii/,..  illy  hi    horizontal!) 


31  1 


SOME  OTHER  BIG  TRUSTS. 


from  the  coal  by  hand.  The  coal  districts  of  the  country  arc  operately  largely 
1>\  foreign  labor  and  they  have  been  the  scenes  of  much  of  the  most  sanguinary 
labor  disturbance  with  which  the  history  of  trade  unionism  is  marked.  The 
great  anthracite  coal  strike  of  11)01  and  1902,  settled  by  the  intervention  of 
President  Roosevelt,  was  one  o\'  the  most  remarkable  of  these  disturbances. 

Iron    mining  is  another  greal  industry  of    this  country,  in  1902  the  production 
of  iron  ores  in  the  United  States  being  about  32,000,000  long  tons,  with  Minne 
.  Michigan,  Alabama  and  Pennsylvania  the  principal  producers.      The  Lake 


From  '  I  States  ]  epartment   of  Commerce  and  Labor  Reports. 

TWO    250-VOLT    ELECTRIC    LOCOMOTIVES    IN    COAL    MINES    AT    KINGSTON,    PA. 

Thus  far  the  subjeel   of  mine  traction  has  I n  considered  from  the  point  of  locomotives 

■  ■    .    ,i   or   underrunning   trolleys,  or  by  a    third  rail,   with  current    from  a  dis- 

i   point  y.     It  is  possible,   however,   to  .■mplny  sHi'-piopHlum   m-  ;iutumni,ii,    i., 

pped     with     storage    batteries,    so    as    to    dispense    entirely    with    the    dan 

is  and    wires   charged    with   exposed    live  current.     Several    types 
ise. 

Superior  region  is  rich  with  iron  ore  and  the  Mesabi  and  Vermillion  ranges  are 
the  mosl  productive  of  the  world.  One  mine  in  Minnesota  alone  has  pro- 
duce.! 1,681,000  tons  in  a  year.  Mosl  of  this  ore  when  mined  is  shipped  by  rail 
to  ports  on  Lake  Superior  or  Lake  Michigan  and  thence  by  lake  steamers  to 
manufacturing  cent<  rs  such  as  Chicago,  Pittsburg  and  Cleveland. 

In  mining  of  metallic  ore  or  minerals  th<  methods  used  do  not  differ  much 
from  those  used  in  mining  coal.  When  there  are  surface  deposits  open  mining 
calls  for  stripping  the  overlying  worthless  material  called  the  "burden."     This 


SOME  OTIlVAi  BIG  TRUSTS. 


315 


may  be  removed  by  pick,  shovel  and  wheel-barrow  or  by  tram-car  and  steam 
shovel.  When  the  ore  is  exposed  to  view  there  are  several  methods  of  Loosening 
it.  The  most  desirable  position  for  the  ore  is  on  a  hill  side  where  the  pit  will 
drain  itself.  One  form  of  surface  is  of  particular  interest — hydraulic  mining. 
This  is  used  mosi  frequently  in  mining  gold.  Water  is  brought  a  gnat  distance 
with  a  heavy  fall  and  is  directed  by  means  of  great  nozzles  against  the  ore 
body,  tearing  it  loose  and  separating  gold  from  rock  material.  One  can  hardly 
imagine  the  destructive  power  of  a  stream  of  water  thus  used  until  he  sees  it  in 
operation. 


A  NEW  WAY  OF  LOADING  COAL  ON  CARS. 

The  coal  la  hoisted  rrom  the  mine  to  a  system  of  chutea    through  wl 
ns,  so  that  four  ralli 

Willi     ;i    Mitt-  "1     COal. 


Underground  work  i^  mosi  common  in  metallic  mining,  because  mod  ol  the 
ore  deposits  come  in  irregular  places.  The  mines  run  i<>  grcal  depths  and  havr 
man}   cross  sections.     (Se<   description  of  Calumet  and  Hecla  mini  ). 

Th.  extraction  of  salt  from  the  earth  nearl}  approaches  the  mining  pro* 
and.  in  fact,  where  rock  sail   is  obtained  deposits  are  worked  bj   actual  mil 
methods,  rach  as  the  use  of  the  customarj  shaft,  chambers,  bn  alters,  si  parati 
etc.     The  simplest  method  of  obtaining  salt,  however,  is  l»\  evaporation  of 


316 


SOME  OTHER  BIG  TRUSTS. 


water.  This  Is  used  seldom  save  where  no  subterranean  supplies  of  brines  or 
rock  sail  exist.  Tliis  method  consists  simply  in  exposing  the  sea  water  in  tanks 
to  the  sun's  rays. 

Brines  from  below  the  surface  of  the  earth  are  pumped  up  through  drilled 
wells,  after  the  manner  of  boring  for  oil.  Attn-  one  tube  has  been  driven  down 
into  the  earth  another  and  larger  one  is  sunk  outside  of  it,  extending  to  a 
lower  level.  Water  is  then  forced  down  between  these  tubes,  dissolving  the  rock 
salt,  which  comes  up  in  solution  in  the  inner  tube.  After  it  is  brought  to  the 
surface  this  brine  is  taken  to  settling  tanks  where  suspended  clay  is  allowed  to 
settle.  Then  the  brine  is  pumped  to  evaporating  vats.  These  are  either  placed 
under  a  movable  roof,  so  as  to  be  subjected  to  the  sun's  heat,  or  are  near  furnace-; 
or  steam  pipes  which  evaporate  the  water  by  artificial  heat.  The  latter  is  the 
usual  method. 


ENTRANCE    TO    THE    CHICAGO    RIVER    FROM   LAKE    MICHIGAN. 

T'ntil   the  C  Drainage  Canal   was  bulll   by  the  City  of  Chicago  al    a   cost   of  about 

0,  this  river  was  supposed  to  empty  Into  Lake  Michigan  and  carry  off  the  sewage 

A    strong  wind   from   the  easl   or  northeast,  however,   would  change  the  current 

of    the   river,    driving    ii    backwards.      The    I>rainage  Canal    has   caused   a   continuous   current 

inland,   purifying  the  river  water.     The   View  also   shows  lake  boats  which  carry  both   pas- 


From  the  United  Bta1 

INTERIOR     VIEW     OF     MARBLE     QUARRY.     PROCTOR.     VERMONT. 

K?dcUeCn?gof8t?hee8oS?pu? 
and  dei  orative  work. 


CHAPTER   XXVI 

THE  HARVESTER  TRUST. 

.in  Estimated  Profit  of  Forty  Million  a  Year     Save  the  Wheat  Fields-  Wealth 
of  Agriculture— Improvements  in  the  Implements  of  the  Farmer — Immense 

Hay  and  Corn  Crops. 

When  it  is  considered  thai  the  chief  characteristic  of  a  trust  to  be  profitably 
organized,  is  as  nearly  a  total  monopoly  of  the  field  of  industry  which  it  fills  as 
possible,  the  Harvester  Trust  can  be  said  to  be  typical  of  all  that  is  aimed  at 
in  trust  organization.  In  the  first  place  the  field  of  this  trust  which  in  its  cor 
porate  title  is  known  as  the  [nternational  Harvester  company  is  as  rich  as  ran  be 
imagined.  Kadi  year  the  production  of  the  American  farms  in  round  numbers 
is  $4,900,000,000.  This  is  about  eight  times  the  receipts  of  the  government  in 
one  year,  is  more  than  all  the  savings  hank  deposits  in  the  United  States,  and 
is  almost  three  times  the  gross  earnings  of  all  the  railroads  of  the  country.  It 
is  six  times  the  Capital  of  all  the  national  hanks  and  four  times  the  output  of 
all  the  mines      gold,  silver,  iron,  copper  and  coal. 

Naturally   to   produce  this  annual   crop   the   farmer   must    spend   a   great    ileal 
for  machinery,  implements  and  tools.      This  amounts  annually  to  about  $100, 
()()(),()()().      It  was  for  the  purpose  of  controlling  the  business  of  manufacturing 
this  farm  tool  supply  that  the  Harvester  Trust  was  formed  in  1902.      That  the 
field  has  been  lucrative  and  that   it   has  been  controlled  is  testified  to  by  the  olii 
cial   slat,  ineiits  of   the  company    claiming   thai  '.):)    per  cent,   of   the   harvi 
machines  Bold   in   this  country   are  of  the   International    Harvester  Compa 
manufacture.     It   i^  estimated  that   this  trust   makes  about   $40,000,000  h 
,„ii  of  this  business  of  manufacture.     In  order  to  conduct  this  business  the  trust 
organized  with  a  capital  slock  of  $120,000,000. 

The  component  parts  of  the  trust  before  the  incorporation  which  con 
Bolidated  five  independent  concerns  into  a  centralized  monopoly  were  the  Mc 
Cormick    Harvesting  Machine  Company,  the  Decring   Hai  I  ompany,  the 

Piano  Manufacturing  Company,  the  Milwaukee  Han  I  ompam   and  the 

Warder.  Bushnell  .V  Glessncr  Company.      At    the  time  of  the  tru  ition 

these  were  private  or  close  corporations,  controlled  h\    tin    Families  which  had 
found,  d  them,  principally  03    the  Met  n  the  trust  -  nized 

819 


;-;,» 


HARVESTER   TRUST  AND  AGRICULTURE. 


it  was  announced  officially  thai  no  stork  would  be  offered  for  sale  to  the  public, 
for  control  was  to  be  held  l>v  those  who  conceived  the  idea  of  monopolizing  the 


THE    MANUFACTURE    OP    BINDER    TWINE    BY    MACHINERY. 

ei    Industry    whereby   the   Introduction    of   labor-saving   machinery 

'"ff •'  ■  mand   for  labor,  for  had   not   the   self-binding   reaper   been   invented, 

■    demand    for    the    twine.     Most    of    it    is    made    from    Manila   hemp,    which 

from  tb^-  Philippine  islands.     Chicago  is  by  all  odds  the  greatest   twine  producing  cen- 

irld   and  distributes   its  output    from   Oiina  to  Peru.     One  Chicago  manufacturer 

-ii    binding   twine   every   working  day   In   the  year   to   reach   half   way  around 

}„, , *;""'"•   .The  capacity  of  his  two  manufactories  is  eighteen  miles   every  minute,  or  about 

?,,Z',\. 320   miles  a  yar. 


HARVESTER  TRUST  AND  AGRH  ULTURE.  :il2i 

farm  implement  trade.      Later  the  McCormicks  gave  the  employes  of  the  Mc- 
Cormick  plants  an  opportunity  to  share  in  profits  by  taking  some  of  the  -lock. 

and  elsewhere  sonic  stock  was  distributed  in  small  amounts. 

Besides  having  almost  a  complete  monopoly  in  its  chosen  field  and  hence  able 
to  raise  prices  of  its  machinery  considerably  before  independent  concerns  can 
cut  into  its  business  to  a  great  extent,  the  trust  is  favored  by  the  government 
in  tariff  benefit'-,  patent  rights,  valuable  trade  marks,  etc.  The  trust  also 
controls  great  iron  mines,  coal  mines,  steel  mills,  etc.,  by  means  of  which  it  is 
able  to  manufacture  more  cheaply  than  the  independent  concerns.  Further- 
more it  controls  railways,  steamships,  ropeworks  in  .Manila  and  other  industries 
which  enable  it  to  invade  Europe,  Asia.  Africa,  Australia  and  South  America 
with  its  products.  This  foreign  business  is  supposed  to  clean  op  about  $21,000,- 
000  a  year  and  most  of  this  business  is  done  at  a  lower  rate  than  that  given  the 
American  farmer.  The  reason  advanced  by  the  trust  for  this  discrimination 
against  home  buyers  is  that  it  is  surplus  that  is  shipped  abroad,  and  anything 
above  a  certain  amount  is  char  profit.  The  farmer,  however,  is  asking,  "How 
does  the  'square  deal'  enter  this  proposition.-"  In  fact  >o  sharp  was  the  crj 
against  the  practices  of  the  Harvester  Trust  that  an  attempt  was  mad.'  in  Min 
nesota  to  start  a  state  factory  for  the  manufacture  of  farm  implements  so  that 
more  active  competition  against   the  trust  could  be  organized. 

Save   the    Wheat   Fields. 

Today  one  of  the  greatest  problems  ahead  of  the  American  farmer  is, 
Must  the  people  of  the  I'nite.l  Stales  buy  its  bread  of  foreign  nations? 

Few  people  nali/.ed  that  such  a  question  ever  could  come  up  until  in  1904 
the  United  States  government  was  forced  to  grant  a  rebate  on  the  custom  duty 
on  wheat  imported  into  this  country  so  as  to  prevent  the  great  export  flour  hide 
of  the  United  States  from  going  into  ruin.  This  came  from  the  verj  poor 
crops  of  wheat  that  year,  which  iii  turn  made  the  supplj   for  flour  -<>  small  thai 

we  imported  wheal   from  Canada  to  mi\  wiih  the  d »tic  supply  al   the  mills. 

Thus  we  found  ourselves  confronting  the  humiliating  fad  thai  our  noble  rank 
among  the  nations  as  purveyor  of  breadstuff's  for  the  world;  as  the  granny 

0f    the    world    in    fact       was    threatened.       In    our   (lour   trad,     will.    England 
Ireland,  Russia   far  outstripped   us.       Of  course  some  people  al  this 

down    -'is    simp|\     a    CTOp    failure    which    is    bound    to   com-     one.     in    a    ulnL  Bui 

no  [ess  authority   than   James   Wilson,    -        tar}    of    Agriculture   in    President 

Roosevelt*S  cabinet,  judged    the  difficulty    to  I„     fundamental. 

The  estimated   product™    capacity  of  th<    ipring   and   winter  wheal 


HARVESTER   TRUST  AND   AGRICULTURE.  823 

is  about  750,000,000  bushels,  ami  uearly  thai  much  has  been  raised  in  a  year 
of  bumper  crops.  There  is  no  question  that  there  is  Land  enough  to  raise  all 
the  wheat  this  nation  needs  to  consume,  but  in  1904-  the  total  crop  was  less 
than  550,000,000  bushels  and  the  consumption  was  about  fi1-  bushels  to  each 
inhabitant  or  about  what  was  grown  that  year.  It  is  a  fact  that  Americans  are 
the  greatest  wheat  eaters  in  the  world  and  consumption  LS  increasing.  The 
world  also  is  calling  steadily  for  more  wheat.  Something,  then,  is  seriously  the 
matter  when  we  learn  that  during  the  government  year  which  ended  dune  80, 
1904,  this  country  exported  in  wheat  and  wheat  Hour  only  to  the  extent  of 
120,727,000  bushels,  compared  with  202,905,000  bushels  the  previous  year. 
Furthermore  since  that  time  exports  fell  off  to  a  greater  degree,  in  the  seven 
months  following  the  exports  being  equal  to  only  27,927,000  bushels  compared 
with  93,083,000  bushels  in  the  corresponding  seven  months  of  the  previous 
year.  This  points  to  two  things,  the  increased  home  consumption  and  the 
poor  crops  in  recent  years. 

At  once  the  question  is  asked,  What  is  the  trouble?  Authorities  answer  thai 
the  farmer  is  robbing  the  soil.  Year  after  year  the  soil  has  been  given  little  or 
no  rest.  Crop  after  crop  has  been  grown  and  has  used  up  much  of  the 
nitrogen,  or  plant  food,  in  the  earth.  It  is  the  law  of  nature  that  the  land 
must  have  a  rest  or  else  musl  be  given  other  means  of  accumulating  the  life 

giving  properties  that  will  grow  good  wheat.  Certain  vegetables  if  planted  in 
the  place  of  wheat  for  a  seaxni  or  two  help  the  fulds.  Hut  scientific  fertilizing 
is  one  of  the  best    methods  to  Urd   the  land. 

Iii  a  little  over  twenty  years  the  agricultural  productive  power  of  tin-  United 

States    has    nearly    doubled    itself.       In    1880    the    wealth    of    the    principal    crops 

measured   roughly   was  aboul    $2,212,500,000.      In    1900  this  wealth  had   been 
increased  to  about  $3,764,000,000,  in  L904  it   passed  the  $4,000,000,000  n 
and  now  is  steadily  gaining  on  the  goal  of  $5,000,000,000.     Pria  s  <>\'  commodi 
ties  change  from  time  to  time,  but  the  following  table  will  indicate  approximately 
tin  yield  and  market  value  of  the  harvests  of  1904 

\.  ki    M.l  .       PRODI  <   PIOW,  m   -ill  l  s.  VALUE. 

Corn      92,231,581  2,467,480,934     $1,087,461,440 

Winter   wheal    ..    .26,865,855  146 

Spring   wheat 17,209,020  219,464,171           184,878,501 

Oats    27,842,669  894,595,552               1,900,013 

Barley    .  .                   5,1  t5,878  139,1  W,958 

Rye  ' 1,79  !,6  .'.;  I. :.(!".            18  ' 

Buckwheat  15,008,                        150,768 

Flaxseed    ,                       I  ,400,584                       ,758 


i  J  t  HARVESTER   TRUST  AND  AGRICULTURE. 

ACREAGE.       PRODUCTION,  BUSHELS.  \A1.UE. 

Kiev    662,006         81,096,088  18,891 ,428 

Potatoes    8,015,675        882,880,800  150,678,892 

Hay  39,998,602         60,696,028  529,107,625 

Tobacco  896, 169     t660,460,7S9  53,882,959 

Other  grasses,  etc 700,000,000 

Cotton    $13,500,000  441, 250,000 

Fruit,  etc 200,000,000 

Wool  (scoured)    {82,000,000  16,000,000 


Total,  1004 $4,371,533,002 

Total.  1000 3,764,000,000 

Total,  1890  2,460,000,000 

Total.  1S80 2,212,500,000 


♦Tons  f  Pounds.  f  Bales. 

From  the  foregoing  table  it  will  be  seen  that  corn  brings  the  most  wealth  to 
the  country.  If  hay  be  considered  separately  and  not  figured  in  with  other 
grasses  such  as  alfalfa,  etc.,  these  other  grasses  come  second  in  the  list.  Then 
comes  hay  and  closely  following  are  wheat  and  cotton.  In  considering  the  great 
wealth  derived  from  agricultural  pursuits  of  the  country  the  public  often  looses 
sight  of  the  value  of  hay  and  grasses.  When  a  failure  or  partial  failure  is 
reported  in  the  corn,  cotton  or  wheat  crops,  great  concern  is  expressed  over  the 
loss  thus  occasioned.  But  almost  always  the  grass  and  hay  crops  make  up  in 
great  measure  what  is  lost  through  the  other  misfortune. 

Grasses,  generally  speaking,  number  something  like  3,500  species  and  range 
in  size  from  less  than  an  inch  in  height  to  the  100  feet  or  more  of  the  gigantic 
bamboos.  They  are  distributed  over  nearly  the  whole  world,  some  being  charac- 
teristic to  the  tropical  regions,  others  to  the  far  north  or  south  in  the  vicinity  of 
almost  perpetual  snows.  Some  nourish  in  dry  and  sterile  soils  while  others 
abound  in  rich  ground  with  abundant  moisture.  Some  are  peculiar  to  marshes, 
stagnant  water  or  slow  streams  and  some  grow  only  along  the  seacoast.  Many 
grasses  are  provided  with  peculiar  adaptations  to  protect  them  against  drought 
and  hot  winds.  Between  the  veins  on  one  side  or  the  other  are  large,  thin-walled 
cells  that  keep  the  leaf  expanded  when  normal  conditions  are  present.  When  a 
dry  wind  blows  they  collapse  and  the  leaves  roll  up,  preventing  too  great  evapo- 
ration. When  rain  comes  again  the  cells  swell  out  and  cause  the  leaves  to  return 
to  normal  shape.  Some  of  the  principal  grasses,  many  of  which  make  good  hay, 
are  pampas  grass,  buffalo  grass,  timothy,  sweet  vernal,  Kentucky  blue  grass, 
grama  grass,  rough  leaved  grass,  red-top,  brome,  blue-stem,  mesquit,  etc.    Grasses 


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826  HARVESTER   TRUST  AND   AGRICULTURE. 

ot  uianj  kinds  are  used  for  pasturage,  for  soiling  and  for  hay.  They  constitute 
a  very  important  group  <>t'  feeding  stuff  for  all  farm  animals. 

The  value  of  grasses  for  feeding,  however,  is  greater  in  the1  forms  of  hay, 
or  cured  crops,  than  in  green  grasses.  This  is  because  hay  contains  more  nutritive 
materia]  in  proportion  to  its  hulk  than  the  green  crops,  for  it  has  been  con- 
centrated by  the  evaporation  of  a  Large  amount  of  the  water  originally  present 
in  the  grass.  The  different  sorts  of  hay  are  very  important  feeding  stuffs  for 
farm  animals  because  they  not  only  contain  nutriments  but  because,  like  all 
coarse  fodders,  they  furnish  bulk  in  the  ration.  In  early  times  hay  alone  was 
used  as  the  winter  fodder  for  animals.  Experience,  however,  lias  shown  thai:, 
although  animals  may  be  maintained  without  other  feeding  stuffs,  where  abundant 
milk  supply  or  heavy  weight  is  desired  grains  or  other  food  must  supplement 
hay.  Most  important  hays  arc  made  from  such  grasses  as  timothy,  meadow 
fescue,  meadow  foxtail,  brome,  etc.  Hay  also  comes  from  such  legumes  as  clover, 
alfalfa,  etc.,  and  from  cereal  grains  such  as  rye,  oats  and  barley.  Generally 
speaking  hay  should  be  made  from  grass  cut  before  it  hears  fully  ripened  seed,  as 
the  nutritive  value  increases  up  to  this  time  and  decreases  thereafter. 

Corn  is  a  kind  of  grass.  It  is  a  universal  crop  to  the  United  States  and  is 
grown  on  many  different  kinds  of  soil,  but  for  its  best  growth  a  well-drained, 
rich,  sandy  loam,  which  does  not  hake  during  dry  weather,  is  required.  The  bulk 
of  the  world's  corn  crop  is  produced  in  the  northern  portion  of  the  Mississippi 
Valley,  where  it  matures  in  about  five  months.  It  is  planted  from  about  May  1 
to  the  twentieth  of  that  month.  In  other  latitudes  planting  is  done  late  enough 
to  escape  late  spring  frosts.  The  "corn  belt"  of  the  upper  Mississippi,  as  it  is 
termed,  is  made  up  principally  of  Illinois,  Indiana,  Iowa,  Kansas,  Nebraska  and 
Missouri.  These  states  produce  about  three-fifths  of  the  corn  crop  of  the  United 
About  fifty  bushels  to  the  acre  is  considered  a  good  yield,  but  the  average 
yield  for  the  whole  United  States  is  about  25  bushels  to  the  acre.  Tlie  largest 
yield  of  corn  on  record,  237  bushels  an  acre,  was  produced  in  South  Carolina. 

The  time  of  harvesting  corn  depends  to  some  degree  upon  the  use  to  which 
the  crop  is  to  be  put.  When  fodder  i^  the  purpose  corn  is  cut  when  the  kermis 
begin  to  glaze  and  the  lower  leaves  begin  to  dvy.  The  cut  stalks  art'  put  up  in 
shocks  and  ht't  to  cure  in  the  field.  When  (\vy,  the  ears  are  removed  and  the 
stalk-  are  used  at  once  for  feeding  or  are  shredded  and  then  U(\.  Corn  grown 
for  grain  is  cut  when  it  is  fully  ripe.  The  ears  are  gathered,  husked  and  stored 
m  >iat  cribs,  through  which  the  air  passes  iii  drying  the  corn  .and  preventing 
attacks  qf  mold.  The  nm-l  common  disease  to  which  corn  is  subject  is  smut". 
This  diseasj  i-  not  well  understood.     Rust  does  no  material  injurv  to  corn. 


HARVESTER    TRUST  AND   AGRICULTURE.  327 

Because  of  its  value  a*  a  i'ood  for  the  human  being  and  for  its  ready  adapta- 
bility into  many  tonus  of  food,  wheat  is  the  best  known  and  most  valuable  of 
tlie-  grains.  The  original  home  of  wheat  is  unknown,  but  probably  it  was  first 
a  native  of  western  Asia.  When  wheat  was  first  used  is  not  known,  for  in  most 
ancient  monuments  wheat  lias  been  found,  proving  that  before  history  was  written 
wheat  bad  been  used  as  a  domestic  food.  It  was  not  grown  in  America  before 
Columbus's  discovery. 

Wheat  needs  a  fertile  and  well-prepared  soil.  It  grows  best  and  makes  most 
of  its  growth  during  tin-  cool  part  of  the  year.  Therefore,  it  should  lie  sown  as 
soon  as  conditions  will  permit.  A  moist  soil  at  sowing  time  is  tbe  desirable 
condition,  provided  it  is  not  so  moist  that  it  cannot  be  properly  worked.  Wheat 
is  generally  harvested  before  it  is  dead  ripe  in  order  to  prevent  the  grain  from 
shattering  during  the  different  processes  from  the  time  it  is  cut  until  it  is  stacked 
or  threshed.  This,  however,  is  not  the  case  in  California.  The  time  of  harvesting 
wheat,  like  the  time  of  sowing,  varies  with  the  latitude.  There  is  a  tide  of  wheat 
harvests  that  sweeps  over  the  United  States  from  May  until  August.  This  tide 
begins  in  Texas,  where  the  wheat  is  sown  firsl  and  where  naturally  it  matures 
first,  and  ends  in  tic  late  summer  harvesting  in  the  greal  spring  wheat  country 
of  the  norl  hues!,  m  states. 

Harvesting  time  on  the  American  farms  is  an  interesting  and  critical 
period.  When  the  work  of  cutting  and  shocking  is  done,  the  sheaves 
are  hauled  and  stacked,  remaining  so  until  threshing  time.  The  principal 
thing  to  do  in  stacking  wheat  is  to  see  to  it  that  the  outer  tier  of  sheaves  slanis 
so  that  the  rain  may  be  shed  from  the  grain.  In  this  country  the  threshing  i* 
usually  completed  in  the  fall.  The  wheat  crop  of  the  world  in  1900  was 
2,586,025,000  bushels.  Europe  supplied  1,475,472,000  bushels  of  this  and  the 
United  States  about  half  as  much.  The  principal  wheal  growing  stales  id'  this 
countrj  are  Minnesota,  North  Dakota.  Ohio,  South  Dakota.  Kansas,  California, 
Indiana.  Nebraska,  Missouri,  Iowa.  Washington,  Pennsylvania  and  Michigan, 
the  yield  of  wheal  running  proportionately   in  the  ord<  r  of  states  named. 

During  no  period  has  the  development  of  harvesting  crops  been  so  marked  as 
during  the  last  half  of  the  nineteenth  century.  In  olden  times  fanners  used  the 
singli  handed  sickle  and  two  handed  scythe  and  for  a  Ion-;-  time  these  were  the 
onl\  implements  for  cutting  grain.  The  cradle  is  a  much  more  receni  invention 
which  consists  id'  a  scythe,  to  the  handle  of  which  is  fastened  a  se|  of  three  or 
more  fingers  of  lighl  wood  as  long  a-  the  blade.  Use  of  this  caused  the  stalks 
of  grain  to  be  piled  up  neatly  as  they  were  cut  down.  The  gleaner  was  ;1  feature 
of  olden  time  harvest  ing.    This  person  w  en!  along  after  the  reapers  who  gathered 


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HARVESTER   TRUST  AND  AGRICULTURE.  329 

up  the  grain  and  picked  up  the  heads  of  grain  overlooked  by  them.  Methods 
of  separating  grain  from  the  straw  and  chaff  also  were  crude.  Sheaves  were  spread 
upon  a  floor,  which  was  often  a  bare  rock  or  the  earth,  and  animals  dragged  heavy 
planks  across  it  until  separation  seemed  complete.  Flails  also  were  used  to  beat  out 
the  grains  from  the  straw.  Then  the  chaff  was  blown  away  by  fans  and  the  straw 
picked  up  by  forks. 

Today  all  this  is  changed.  The  cradle  has  given  way  to  the  mower,  which 
at  (iist  was  used  only  in  cutting  grass  for  hay,  but  which  later  was  adapted  to 
cut  grain  and  lay  it  in  piles  of  convenient  size  for  binding  into  sheaves.  Then 
cam<  the  self-binder  which  not  only  mows  the  grain  but  binds  the  straw  into 
bundles  with  twine  or  wire.  The  heading  machine  is  drawn  by  a  score  or  more 
of  horses  or  Is  propelled  across  the  field  and  severs  only  fhe  heads  of  the  plants  and 
thresh.-,  and  winnows  the  grain  and  runs  it  automatically  into  sacks  ready  for 
market.  In  many  western  districts  this  machine  has  displaced  all  machines  needed 
in  thr  various  processes  of  harvesting.  Where  grain  must  stand  in  the  shock  to 
dry  the  threshing  machine  is  still  popular.  This  device  long  since  has  replaced 
the  flail  and  fanning  mill,  combining  as  it  does  the  purpose  of  both.  Formerly 
it  ran  by  horse  power,  but  now  it  is  generally  drawn  and  propelled  by  a  steam 
traction  engine.  The  hay-loader,  drawn  behind  the  wagon  to  be  loaded,  has 
largely  taken  the  place  of  loading  by  hand  forks  and  the  horse-power  hay-fork, 
which  will  lift  a  large  load  of  hay  in  three  or  four  forkfuls,  has  become  a  com- 
mon implement  on  farms.  Other  kinds  of  agricultural  work  required  other 
devices  and  we  find  steam  or  electrical  plows,  patent  drills  and  many  other  modern 
devices   for  Lessening  manual  labor. 


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CHAPTER   XXVII 

THE    RISE    OF   A    GREAT    NATION. 

Marvelous  Growth  of  this  Country  of  Ours  Since  the  Close  of  the  Civil  War — 

Population  Increased  from  33,000,000  to  83,000,000  Souls— Wealth 
Increased  nearly  Six-fold — Thousands  of  Miles  of  Railway  Built — World's 
Cotton  Monopoly,  Etc. 

Ni.vkk  in  the  history  of  civilization  has  there  been  a  record  to  equal  that  of  the 
growth  of  the  United  States  in  the  period  since  the  close  of  the  Civil  War. 
When  Robert  E.  Lee  with  his  army  of  Northern  Virginia  surrendered  to  U.  S. 
Grant  on  April  9,  1865,  ;it  Appomattox,  there  were  33,000,000  people  in 
the  United  States.  In  1905  the  inhabitants  of  this  great  nation  numbered 
83,000,000  souls.  Then  there  were  ,'3(j  states  in  the  nation,  counting  the  eleven 
included  in  the  confederacy;  today  there  are  45  states.  At  the  close  of  the  war 
the  wealth  of  the  country  was  estimated  at  $20,000,000,000;  so  marvelous 
lias  been  the  growth  since  then  that  the  country's  wealth  has  expanded 
almost    six    fold   and   now   is  estimated  at   $110,000,000,000. 

The  importance  of  the  date  ISO-")  as  a  starting  point  in  American  progress 
is  suggested  by  several  instances.  War  had  checked  immigration  upon  which 
tin'    country    depended    for    much    of    the    brain    and    brawn    to    develop    it- 

Wonderful  resources,  and  the  Influx  of  European  population  began  to  expand 
marvelously  only  after  the  war  ended.  The  war  had  bein  costly  ill  more 
than  one  Bense  of  the  word:  hundreds  of  thousands  of  lives  had  been  lesi  and 
billion-  of  dollars  of  properly  had  been  destroyed,  to  say  nothing  of  the 
wiping  out  of  $1,500,000,000  of  assets  of  the  Southland  represented  by 
slaves  which  were  counted  in  the  aggregate  of  the  country's  wealth  previous 
tu  the  Emancipation  Proclamation.  Naturally  the  effects  of  this  loss  were 
shown  in  lh''  decrease  in  the  value  of  property  for  the  decade  ending  1870  in 
every  Blavc  state  excepl  Delaware,  .Maryland  and  Missouri,  which  did  not 
secede  Therefore  property  was  at  low  ebb  in  1865  and  from  this  date 
the  greal  expansion  in  tin-  North  and  Wesl   began. 

Furthermore  it  was  at  this  time  that  the  firsl  real  work  on  the  first  of  the 
transcontinental  railroad-  began.  There  had  been  action  in  Congress  as  early 
as  is  is   looking  i<>  the  building  of  a   road   to  the   Pacific,  but    it   was  really 


RISE  OF  A  GREAT  NATION. 

tlir  war  which  resulted  in  the  construction  of  the  Union  Pacific  and  the  Central 
Pacific  railways,  begun  in  1865  and  completed  in  1869,  and  which  broughl  rail 
connection  between  the  Atlantic-  and  Pacific  Oceans.  Indeed,  at  the  close 
,,f  the  war  there  were  only  85,000  miles  of  railway  track  in  the  United 
Stat,-:  for  all  practical  purposes  there  was  not  a  mile  of  road  west  of  the 
Mississippi  River.  Today  the  railways  of  the  United  States  measure  211,000 
miles  in  extent.  While  many  patriot-  in  the  days  of  Polk,  Taylor,  Fihnore, 
Tierce  and  Buchanan  argued  for  the  construction  of  a  transcontinental  road  for 
business  purposes,  it  was  military  necessity  that  broughl  about  actual  rail 
laying  in  1865.  The  agents  of  the  Secession  had  been  active  in  California 
in  1861,  and  one  of  the  impulses  which  secured  legislation  for  building  the 
road  was  the  fear  that  if  direct  and  quick  communication  between  the  Pacific 
slope  and  the  rest  of  the  country  could  not  he  obtained  soon  a  movement  for 
separation  might  gain  headway  in  the  far  west. 

Hardly  had  the  Union  Pacific  and  the  Central  Pacific  joined  rails  when 
further  great  impetus  to  railway  building,  also  a  result  of  the  war,  was  given 
and  the  second  of  the  great  transcontinental  roads,  the  Northern  Pacific, 
sprang  into  existence.  On  this  road  construction  work  began  in  1870.  Jay 
Cooke,  the  man  who  floated  the  bonds  of  the  United  States  government 
during  the  war.  headed  the  project,  hut  the  panic  of  1873  swept  him  off  his 
feel  and  the  work  on  the  road  was  suspended  until  Henry  Villard  seized  the 
opportunity  and  pushed  the  road  to  completion  in  1883.  These  two  great 
roads  and  the  Southern  Pacific,  the  Great  Northern  and  the  other  trans- 
continental roads  threw  open  the  trans-Mississippi  West  to  settlement  and 
incited  a  population  expansion  without  parallel  in  the  previous  history  of  the 
country,  or,  indeed,  in  the  history  of  any  other  part  of  the  whole  world. 
During  the  Civil  War  for  the  first  time  since  1818  the  railway  construction 
of  the  United  States  had  fallen  to  below  1,000  miles  a  year.  In  the  suffering 
-  :-hi:md  building  practically  had  ceased.  The  ,'35,000  miles  of  track  in 
1865,  expanded  to  52,000  miles  five  years  later,  the  North  and  West  being 
practically  the  sole  gainers  thereby.  Industrial  expansion  below  the  Mason 
and  Dixon  line  was  to  begin  later.  The  52,000  miles  of  roadway  of  187;) 
became  93,000  miks  a  decade  later;  in  1890  the  mileage  of  the  country 
amounted  to  166,000;  in  1900  it  amounted  to  194,000  miles  and  at  the 
beginning  of  1905  if  amounted  to  211,000  miles.  This  increase  of  railway 
mil,  fair  index  of  the  financial  and  industrial  growth  of  the  country  in 

the  forty  years  since  the  close  of  the  gnat  war  of  the  rebellion. 

With  the  removal  of  the  one  great  bone  of  contention  between  the  North  and 


RISE  OF  A  GREAT  NATION.  l.m 

the  South  in  the  abolition  of  slavery,  the  inhabitants  of  not  only  this  country 
but  of  the  whole  world  saw  golden  opportunities  ahead  of  this  nation  in  a 
glorious  era  of  peace.  More  capital  for  industrial  investment  was  sent  to  this 
country  in  the  five  years  immediately  after  Appomattox  than  in  any  fifteen 
years  before  that  time.  The  immigration  into  this  country  which  had  dropped 
to  89,000  people  in  each  of  the  two  years  of  1861  and  1862  leaped  to  247.000 
in  1865,  and  was  :387,000  in  1870.  Two  years  later  fo?  the  Hist  time  in 
history  it  crossed  the  mark  of  400,000.  In  1881  it  crossed  the  600,000  mark 
and  one  year  later  another  100,000  was  added  to  the  yearly  influx.  That  was 
the  maximum  annual  immigration  until  1 1)0:3  when  it  reached  857.000  people. 
Signs  now  point  to  the  million  mark  being  reached  in  1905.  Very  nearly 
three  times  as  many  immigrants  have  landed  in  the  United  States  in  the  forty 
years  since  the  end  of  the  Civil  War  as  came  here  in  the  previous  seventy-six 
years  since  the  first   inauguration  of  George  Washington  as  President. 

Railway  building  and  phenomenal  immigration  could  result  in  but  one 
thing  politically-  tlii'  addition  of  territory  to  the  country  in  the  shape  of 
new  states  added  to  the  Union  as  rapidly  as  population  warranted.  At  the 
end  of  the  will'  there  were  thirty-six  states,  three  of  which  had  been  created  since 
Lincoln's  first  election  as  war  measures.  These  were  Kansas,  admitted  in 
•January,  1861:  Wesl  Virginia,  admitted  about  the  middle  of  the  war  and 
Nevada,  created  .just  in  time  to  take  part  in  the  presidential  canvass  of 
1864.  The  firsi  state  created  after  Appomattox  was  Nebraska,  which  was 
let  in  in  1867.  Colorado  succeeded  in  getting  into  the  Union  in  1876  and 
became  the  "Centennial  State.*'  Then  thirteen  years  elapsed  before  any 
more  stars  were  addd  to  the  flag.  This  time  a  large  bunch  of  states  came 
in.  The  railways  had  been  building  up  the  country  wesl  of  the  Missouri  River. 
The  Northern  Pacific  and  other  great  lines  had  carried  people  over  into 
the  shadow  of  the  Rocky  Mountains  and  beyond  them  mure  quickly  and  more 
cheaply   than   the}    had   gone   from   the   western   border  of   Pennsylvania   over 

into     Ohio     in     the     days     of     President      Jackson.        The     consequence     was     the 
admission,  in    1889,  of  North  Dakota,  South   Dakota,  Montana  :ind   Washington 

and  a  few  months  later  Idaho  and  Wyoming  came  in.     This  completed  the  roll 

;i>    it    stood    in    1905,   with    the   exception    of    Utah    which    was   admitted    in    1896. 

Thus  the  thirty  sj\  states  of  L865  became  the  fortj  li\«'  of  today. 

Although  tin  great  increase  of  wealth,  population  and  prosperity  in  the 
North  and  West  came  through  the  tenihii.it ion  of  hostilities  between  the  North 
and  South,  the  latter,  perhaps,  w;is  the  greater  gainer  in  some  things  thereby. 
Population  and   wealth,  :i>  has  been   stated,   tell  oil"  during  the  great   conflict. 


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RISE  OF  A  GREAT  NATION.  335 

Had  a  census  been  taken  in  1865  it  probably  would  have  shown  fewer  people  in 
the  eleven  ex-Confederate  states  than  there  had  been  in  I860.  For  a  time 
political  intrigues,  such  as  "carpet  bagging,"  worked  against  the  South  in  its 
reconstruction  by  piling  up  debts.  But  the  greatest  difficulty  which  beset 
that  section  of  the  country  through  the  voting  power  granted  the  negro  was 
gradually  overcome  and  in  1877  reconstruction  was  practically  completed  by 
the  withdrawal  of  federal  troops  from  South  Carolina  and  Louisiana. 

But  even  while  the  political  troubles  of  the  Southland  were  at  their  highest, 
the  natural  resources  of  that  section  of  the  country  began  to  attract  attention. 
West  Virginia,  Tennessee,  Alabama  and  other  states  were  rich  in  coal  and  iron 
deposits,  which  before  the  war  had  been  unthought  of.  and  these  have  been 
utilized  in  an  increasing  degree  in  the  last  twenty-five  years  until  the  Birming- 
ham, Ala.,  iron  and  coal  district  is  now  celebrated  around  the  globe.  The 
United  States  for  a  long  time  was  far  down  on  the  lisl  of  coal-producing 
countries.  Not  until  1900,  indeed,  did  this  country  pass  England,  which  then 
led  the  world  in  this  respect.  Today  we  now  -land  at  the  head  and  produce 
JJ7  pel-  cent  of  all  the  world's  coal.  To  this  gain  the  South  has  made  a  large 
contribution.  In  iron  it  has  been  almost  the  same  tale.  In  1SS0  the  pig  iron 
production  of  this  nation  was  3,800,000  tons.  It  was  18,000,000  tons  in  1!)!):} 
and  in  1905  signs  pointed  to  a  total  of  21,000,000  tons.  Here  the  South  has 
made  an  important  contribution  to  the  sum  total  of  the  country's  expansion. 
The  Birmingham  district  now  rivals  that  of  Pittsburg,  and  even  has  advantages 
Over  the  latter  in  having  the  coal,  iron  ore  and  lime  stone  nearer  than  in  the 
Pittshurg    (i.  Id. 

Hut  the  great  - 1 ;  1 1  >  1  <  -  of  the  South  is  cotton:  indeed,  this  product  [s 
ignized  as  distinctly  American  in  the  international  trade  of  the  world 
as  this  country's  cereals.  In  1904  the  South  raised  the  greatest  crop  ^\'  tin 
staple  in  history,  gathering  very  nearly  14,000,000  bales  of  500  pounds  each. 
When  our  takes  into  consideration  the  fact  that  in  I860  the  cotton  crop  of 
the  South  was  of  world  wide  reputation  ami  value  and  yet  was  only  1,800,000 
hah.,  or  about  one-third  that  of  1904,  it  will  be  seen  how  our  great  influence 
has  worked  for  expansion  and  prosperity  of  the  country.  [ndced,  even 
sine.  lsso.  when  the  South's  first  real  progress  since  the  war  began,  the 
cotton  crop  has  much  more  than  doubled  in  size  measured  by  the  190-J 
duct  ion. 

lint   l.i   us  go  a  step  further.  The  United  Stat.,  has  a  monopoly  on  the 
cotton    production    of    the    world,    raising    about    three-fourths    of    the    cotton 

the  whole  world.     And  all  the  American  crop  is  rais<  I  in  the  South.     Nor 


RISE  OF  A  GREAT  NATION. 


is  this  connection  of  the  South  with  cotton  restricted  to  raising  the  raw 
material,  for  the  old  slave  states  now  have  caughl  up  with  the  North.  In  1880 
the  South  manufactured  into  textiles  only  221  hales  of  cotton.  Today 
aboul  half  the  1.000,000  bales  retained  for  consumption  in  the  United  Slates 
and  manufactured  into  articles,  arc  put  through  Southern  home  mills.  If*  con 
ditions  warrant,  this  progress  can  be  furthered  remarkably.  With  the  near- 
ness   of    it-    supply    of    raw    material,    with    cheap    labor    and    with    low    rents, 


GOLD  PROSPECTING  IN  THE  YUKON  COUNTRY. 

Southern  manufacture  could  surpass  that  of  the  North.  As  for  cotton  pro- 
duction, with  the  waste  lands  of  the  South  once  cultivated,  the  bumper  crop 
of  1904  probably  could  be  doubled. 

Great  Production  of  Gold. 

Production  of  gold  today  is  at  a  greater  rate  than  ever  before  in  history. 
In  1904  the  known  new  gold  brought  into  commercial  channels  from  the  mines 
was  $550,000,000  in  round  numbers.  Before  the  year  1905  is  passed  it  is 
possible  there  will  be  added  another  $400,000,000  to  the  world's  gold  supply. 


RISE  OF  A  CHEAT  NATION. 


337 


So  rapidly  indeed  is  gold  increasing  that  political  economists  are  now  refer- 
ring to  the  increase  as  the  "'golden  flood."  Whereas  it  was  an  overproduction 
and  abundance  of  silver  which  caused  great  perturbation  among  financiers  a 
decade  ago,  now  it  is  the  standard  metal  of  money  the  world  over  which   is 


Prom  Lh«    Unit  Departmenl  ol  Commerce  and  Labor  Reports. 

STOPE,  WEST  DRIFT  2,000  FEET  FROM  LINE,  ANCHOR  MINE,  NEAR  PARK  CITY,  UTAH. 

The  production  ol  sold  and  Bllver  antedates  the  da*  -  of  written  history      The  Bearch  foi 

the  precious  metals  prompted  the  discovery  nt   new  continents  and  stimulated   the  effort 

alchemists,  thus  Indirectly  leading  to  the  development  of  scientific  chemistry      JTel   It   is  only 

ni. ik  <<t  gold  milling  In  English-speaking  countries,  at  about   the  mid  He  ol   the 

nineteenth  century,  that  any   |  In  mining  methods  can   be   recorded      And  even   today, 

ng  methods  of  primitive  i bserved   In  actual  operation   In  Borne  parts  of  the 

United  Btatei       The   beginning  of  gold   mining   In   the   United   States   dates   back   to   the   drat 
quarter  of  the  nineteenth  century,  when  some  pla  done  In  North  Carolina    ind 

rking  .it  odd  moments,  giving  to  mining  such  time  as  1 1 1  ■  ■  \-  could  spare 
t  r  •■in  othei   occupatlo 


changing  in   value  and   thereby  changing  the  comparative  prices  of  ■•ill   com 
modities  measured  by  it 

Of   the   greal    supplj    of   gold   now   being   produced   South    Africa    is   the 
greatest    contributor.      During   the    Boer   War   mining   in   the    Transvaal — or 


UISE  OF  A  CHEAT  NATION 

the  Rand  as  it  is  called  -was  cheeked  to  almost  nothing.  Now,  however, 
Chinese  labor  has  been  introduced  in  the  once-more-peaceful  country  and 
progress  in  gold  mining  is  almost  unbelievable.  In  1904  this  production 
amounted  to  about  $90,000,000.  The  United  States  is  a  close  second  with 
$84,000,000  gold  dug  up  from  its  rich  mines. 

The  interesting  question  that  is  heard  is,  where  does  all  this  gold  go? 
Of  course  it  is  a  well  known  fact  that  all  the  new  gold  produced  does  not  go 
into  money.  Between  1895  and  1903  the  amount  of  gold  in  the  money  systems 
of  the  world  increased  from  $4,068,800,000  to  $5,382,600,000,  a  gain  of 
$1,313,800,000.  During  the  seven  years  between  these  dates  the  world's  pro- 
duct of  gold  increased  $2,094,298,300.  Thus  64  per  cent  of  new  gold  went 
into  money  and  :5b  per  cent  is  to  he  accounted  for.  It  is  suppossed  that  a  gnat 
dial  of  gold  goes  into  the  arts  and  sciences — perhaps  25  or  30  per  cent  of  the 
output.  This  would  still  leave  some  of  the  gold  presumably  going  into  hiding 
places,  perhaps  to  be  brought  out  in  sudden  emergency.  Professor  J.  Laur- 
ence Laughlin  recently  suggested  that  possibly  the  great  private  banks  of  the 
world  which  do   not   make  report   hold   this  extra   horde. 

"The  existing  stock  of  gold,  about  $10,000,000,000,  of  which  about 
$5,000,000,000  is  used  in  Hie  monetary  systems  of  the  world,"  said  he,  "is  now 
so  large  that  no  restrictions  on  legitimate  bank  discounts  can  be  assigned 
to  a  scanty  world's  supply  of  gold  for  reserves.  When  the  war  in  the 
Transvaal  broke  out  in  1899  it  was  supposed  by  some  that  the  supplies  of 
gold  for  the  reserves  of  European  banks  would  be  curtailed.  Two  years 
later  the  American  reserves  had  increased  by  $150, ()()(), 000,  those  of  the  Bank 
of  England  by  $18,000,000,  the  Bank  of  France  by' $100,000,000  and  the 
Bank  of  Austria-Hungary  by  ^4:3,000,000.  The  Bank  of  Russia,  for  special 
reasons,  alone,  had  lost  gold.  This  outcome  was  not  surprising.  The  explanation 
is  to  be  found  in  the  vast  supply  of  gold  not  employed  in  circulation,  in 
all  countries,  nor  in  the  arts,  but  held  by  institutions  or  financial  houses, 
not  obliged  to  make  public  reports  of  their  holdings  of  gold." 

It  i-  of  interest  to  nob  that  the  greater  part  of  the  annual  production 
of  Mold  passes  in  and  out  of  the  United  Sates.  In  190  1  $206,000,000  thus 
circulated  through  this  country.  But  we  do  not  hold  this  gold.  The  market 
for  this  precious  metal  is  as  wide  as  the  world.  It  is  currency  the  world 
round  and  when  any  country  wants  it.  it  generally  gets  it  speedily.  Thus 
in  1904  while  the  United  States  produced  24  per  cent  of  the  world's  gold 
product,  it  retained  but  9  per  rent  of  it.  Indeed,  it  held  but  537  per  cent  of  its 
own   production,  thus  giving   to  the   world   of  its  store  to  serve   in   the  arts  and 


RISE  OF  A  GREAT  NATION. 


330 


in  monetary  systems.  For  instance,  during  thai  year  Russia  was  sore  pressed 
in  a  war  with  Japan.  Therefore  we  and  the  rest  of  the  world  sent  some 
$81,000,000  to  the  Czar's  country.  France,  which  is  the  hanker  of  Russia, 
wanted  $61,000,000  that  year.  Europe  during  this  time  took  up  about  $205,- 
()()().()()()  gold. 


Prom  i  he  United   Stat< 


l  >epa  ii  in 


Rep 


INTERIOR    OF   MILL   Or   THE    UNITED    GOLD   MINING,   MILLING   AND     TUNNEL    COM- 
PANY,  IDAHO  SPRINGS,   COLORADO. 

The  extraction  ol   tl  from  thi i  was  In  th<  od  not  differentiated  from 

mining.     'Mm    ii...  i  nutural  method  which  suggested  Itself  to  the  human  mind  foi   dealing  with 
the  gold-bearing  rock  was  to  reduce  it   to  thi  luvial  deposits  were 

,i   and   I"   separate    the  •!  'i   particles  ol    gold    from    the   pulverized    mass   by    the 

ram II lar  method  of  washing      The  advent  of  the  stamp-mil  but  with 

the  progress  of  gold  mining  .i  poinl  hed  where  it  was  round  Inndequnti      The  probh  m 

!,. ii   lulls   solved   uiiiii   the  process  "f   concentration  was  Introduced      Onlj    rifh  ores  could 
bear  the  i  ido  refractory  ores  wl 

could  nol  i"    i'  thrown  awaj      The  new  i ation, 

which   roduci      the   volume  "i   ore   i"  be  shipped  and   treated    wni    tantamounl    to  a 
of  new  gold  mines. 


CHAPTER    XXVIII 

MONEY. 

Chinen    the    First    to   Coin    Money     Sourer   of    Paper    Mom//     The   Modern 
Bank-note  Regarded  as  a  Swedish  Invention. 

Whatf.vkk  fills  the  functions  of  .1  medium  of  exchange  and  a  measure  of 
value,  however  crudely,  is  money.  In  the  early  times  the  exchange  of  com- 
modities was  carried  on  by  barter  or  trade.  Homer,  in  the  Iliad,  says  that 
when 

1  rom  Lemnos  Isle  a  numerous  fleet  had  come, 

Freighted    with    wine 

All  the  other  Greeks, 

Hastened   to   purchase,  some  with  brass  and  some 

With  gleaming  iron;  some  with  hides,  cattle  or  slaves. 

Such  a  method,  however,  was  very  slow  and  cumbersome.  There  were  two 
great  objections  to  it.  Those  who  wished 
to  buy  might  have  nothing  which  those 
who  wished  to  sell,  cared  to  take  in  ex- 
change. Furthermore,  much  time  was 
w  asted  in  trying  to  decide  the  relative  value 
of  the  different  articles  traded  in.  There- 
lore,  gradually,  certain  objects  were  fixed 
standards  of  value  which  might  not  be 
used  themselves,  but  were  accepted  in  order 
to  exchange  again  for  something  more 
desirable  for  use.  Among  other  things 
that  have  been  put  to  this  service  have 
been    fin-.    >kins.    leather,    sheep,    cattle,    early  Chinese  pu   (SHIRT)   money. 

B      C      700 

wampum,    cowries,    grain,    olive    oil,    salt 

and  many  metals.  The  use  of  cattle  in  ancient  Europe  for  this  purpose  resulted 
in  the  Latin  word  for  money,  "pecunia,"  from  pecus,  cattle.  In  our  own  lan- 
guage the  word  ••chattel,"  or  "cattle'*  has  come  to  include  all  property. 

On  the  whole,  pieces  of  metal  were  found  to  be  most  convenient  for  use 
as  money.  They  could  be  divided  and  weighed  easily,  were  easy  to  carry 
and  were  readily  indent  ified.  Therefore  the  names  of  weights  soon  came  to 
pass    tor   the   names   of   coins,   as  the  pound,  the  shekel,  the   livre  and  the  lire. 

340 


MONEY. 


341 


The  metals  most  generally  used  have  been 
gold,  silver  and  copper.  Iron  is  said  to 
have  been  used  in  Sparta  and  among  the 
ancient  Britons  in  the  form  of  bars.  Tin 
coins  are  reported  to  have  been  struck  off 
in  ancient  Syracuse  and  Gaul.  Glass  also 
is  said  to  have  been  used  in  Egypt  and 
Sicily. 

One  of  the  most  remarkable  illustra- 
tions of  the  passage  from  the  state  of  bai- 
ter to  the  use  of  money  is  to  be  found  in 
the  history  of  Chinese  money.  In  ancient 
China  knives  and  pieces  of  cloth  long  had 
been  used  to  a  certain  extent  as  a  standard 
of  value,  almost  as  gray  shirting  now  is 
used  in  India.  About  the  twelfth  century 
before  Christ  the  Chinese  government  tried 
to  substitute  coins  for  various  objects  in 
common  use,  such  as  knives,  pieces  of  cloth, 
hoes,  sickles,  spades,  etc.,  and  made  small 
metal  models  to  represent  the  objects  them- 
selves. The  two  chief  coins  of  this  -oil 
were  tin  "pu"  coins,  roughly  representing 
a  shirt,  and  the  "tao"  or  kmfe  coins  in  the 
form  of  a  knife.     The  word  "pu"  means 

cloth  and  "tao"  means  knife.      These   forms 
were  very   inconvenient   and  gradually   the 
blade  <>f  tin    knife  was  shortened,  while  the  end 

ot  the  handle,  which  was  pierced  by  a  hole  so 
that  the  coin-  might  be  strung  on  a  cord,  was 
enlarged.        Finally     the    blade    disappeared    and 

tin'  circular  end   of  tin    handle  alone   remained 

with    a    hole    in    the    middle.       The    Chinese    said, 

in   explanation   of  the  evolution    l<>   tins   round        tribute  money silver 

shaped  coin,  that  money  which  is  meanl  to  roll        T|ii.    .,.  *;,  *:„™'™; ,,,.,,  ,,,  ln 

around  the  world  should  itself  be  round.     This  V'i.,/',"     bJBtj2S    when* 

change  occurred  about  the  second  century  before  %\™\  ^M  hhHn1  i!i.w< 

U-   ,  I  i.     i     •        ,i         ,•  I  "Shiu     up      the     tribute     money." 

irwt,     and     resulted     in     Mm      form     known     as       etc.,  etc.     St.  Mathew,  xxli.    L5. 


CHINESE     KNIFE     MONEY. 
About     B.     C     300. 


\  \-: 


MONEY. 


"cash,"  now  m  general  use  in  China  and  very  common  in  bhis  country  because 
the  Chinese  attach  it  as  a  lucky  charm  to  articles  sent  for  sale  to  this  country. 
M;m\  of  these  coins  bear  a  mark  like  a  new  moon.  This  originated  in  a 
characteristic  Chinese  accident. 
About  620  A.  1).  a  model  in  wax 
of  a  proposed  coin  was  brought  to 
the  Empress  Wentek  for  approval. 
In  taking  hold  of  it  she  left  on  it 
the  imprint  of  her  thumb  nail.  For 
hundreds  of  years  this  mark  has 
been  on  Chinese  coins  and  ha-  even 
hem  copied  on  the  coins  of  Japan 
and  Corea. 

There  have  been  many  other 
very  peculiar  shapes  of  money.  In 
Persia  scimiter-shaped  pieces  of 
metal  were  used  as  money.  Some- 
times rin^  were  used,  as  in  Ire- 
land down  to  the  twelfth  century, 
and  in  the  interior  of  Africa  today. 
In  other  cases  money  was  in  the 
shape  of  bricks  or  ingots.  These 
gradually  came  to  he  stamped  ,n 
order  to  verify  their  weight  and 
fineness.  Some  countries  seem  not  to  have  known  coins  at  all.  This  appears  to 
he  certain  in  the  case  of  those  who  erected  the  Pyramids,  the  Sphinx,  the  temples 

of  Karnac,  Babylon  and  Nineveh. 

The  word  money  implies  coin.  One 
explanation  of  its  origin  comes  from 
tin  fact  that  it  was  in  the  Temple  of 
Juno  Moncta  that  early  Roman  coins 
w.ic  struck  off.  Cicero  says  Juno  re- 
ceived this  name  from  the  Latin  verb 
moneo,  because  she  advised  the  Romans 
to  sacrifice  a  sow  to  Cyble  to  avert  an 
earthquake.  It  is  probable  that  the  Lydians  were  the  first  of  all  nations  to  intro- 
duce the  act  of  coining  gold  and  >ilver.  Generally  the  right  of  coinage  had  been  a 
prerogative    of    the    government.       Until    1561    coins    were    made    by    heating 


CHINESE     KNIFE     MONEY. 
7-22  A.  D. 

The   blade  was   shortened   for   convenience. 


CHINESE     CASH.       680    A.     D. 


MONEY 


34:3 


spherical   pieces  of  metal  and  punching  them  with  a  die.     In  that   year  the 

mill  and  the  screw  were  invented  and  a  century  later  the  improved  method  of 

minting  was  generally  accepted. 

The   use  of   paper  money   as  currency   and   an   instrument   of  credit   dates 

back  presumably  to  the  Carthaginians.      This  people  used  a  sort  of  stamped 

leather  as  money,  and  it   passed  as  a  representative  of  specie,  but   outside  of 

Carthage    it    was    of    no    value.      Some    historians    regard    paper    currency    as 

having  originated  in  China  late  in  the  second  century  B.  C.      The  explanation 

of   this   origin    has    it    that    when    one   entered    the 

presence  of  the  Emperor  it  was  customary  to  cover 

the  face  with  a  piece  of  skin.     It  was  first  decreed 

that  the  skin  of  a  certain  white  deer  kept   in  one 

of  the  royal   parks  alone  was  permissible   for  this 

use.      These  of  course  sold  at  a   high   price,   hut 

though  they  may  have  passed  from  one  aobleman 

to  another  it  does  not   seem  that  they  were  gener 

>'  ally   circulated.      Travelers   in   China   as   early   as 

by     order     of     Pontius  J                                                                                           ' 

Pilate,     it   bears   the   name  Ti-  Iggg    reported    paper,   or    rather  cotton,   money    in 

berius  on  one  side,   and  on   the  £                                                                                  * 

reverse,     three     ears     of     corn  Um._        \r    account    of   their   use   says    that    SO    much 
bound    together. 

money  was  put  into  use  about   1822  that  the  value 

of  the  notes  fell  until  it  took  $15,000  worth  to  buy  a  cake  of  rice. 

The  modern  hank-note   is   regarded  as  a  Swedish   invention.      In   1().".(i  the 

firsl   bank  in  Sweden  was  founded  by  one  Palmstrucls  and  this  i^  said  to  have 

issued  bank-notes  in   1658.      It   does  nol   seem  clear,  however,  that   these  were 

bank-notes  in  the  present  day  sense,  and  the  first  real  issue  probably  dates  with 

the   foundation  of  the  Bank  of  England,  whose  charter  was  signed  July  27, 

1694.     The  first  reference  to  a  note  of  which  the  amount  was  printed,  is  found 

in  the  minub  -  of  this  institution  of  May  1  and  2,  1695.     The  first  note-,  printed 

from  copper  plates  were  issued  in   1725. 


THE   "WIDOW'S   MITE." 
Two  of  them  went  to  a  "farth- 
ing'-" 
This  coin    was   si rmk   in    the 


k~U/ p#4e  <***   <hA-Gi.a/J£-*S$^j..£<L£Si- 


„  A*-*  Ji^y. 


EXCHEQUER    TALLY. 

TI  ■ 
acknowledging  the  re<  ■  Ipl  nl  Iron 

,    |oan  to  ti,,.   King  ihle  ou1   of  the  Binklng  fund, 

n   a<  couni    -.1    i  5( granted   per  Act.  II.  <  '    the   '"I' 

and  the  smaller  w  bottom  the  balance  ol   the  amount, 


.3>CS 


Ol"  D 

o  <n  +2 


.=  a 

03  O 


<D  O 

^  eg 

0)5 


03  Oi       « 


4) 

©.C 


.£•     c 


5  rt  s 


M 

w 

s 
a 

b 
gg 

w 
o 

1/1 


J  ID 

tal 


c     8 

v.     5 

c  c  — 


0)  « 

"So 


to  .; 
in -a  {; 


^  t;  *^        ■-  u  - 


K  —  JE:  —  x  - 

s  5 .- ih 

>d  ■/.  C  S  *•  *j 

4>  c  rt.r.-  o 
~to toe p£ 

a  ,c  to  5     c 
g  H  §  c  sd  - 

4)  [0     .     ••-  4 
>  C  a!  C  0«H 

a     :  c», 


11  S> 


-.a. 


I  cq 


v. « : 


!  J*  4,  4 

h£  ffl 


<H-C  4 

■•sll 

5    <*- c 
fc.2  o'" 

■9  V-~  5 

O  3  O  C 

"3  *-      K 

P  0j  OS  41 

-     -r  u 

=>  —  °  s 

O  O-m  4 

+-  ^>w  g 

.  t.  - 

cS  esH 

4  ^>  M 

[;:"  = 
'-  OS  = 

«  fi 


©S?Sl 


ii 


4 

«  5  £  S  5  4  2  r/-  -  £  : 

_-_  G  t-  ^<  ~  *'  r;  4  C  s. 

i5«  ~  to—      csjn^ 

443^.       ^Oo^C 
C  G.O.fl  r  —       4       3+J 

—  r      rJotai,«, 

i.   r   4    — "  ■"  4        C        C 

0  C  £  4  £  a  rt  >.o  o  k 


K   O       — 


g  8J--i»5s*IJl 

ft      E»       — —  ^.0405*-—  C- 
S      4  «C  ^  hfj  S-       4  4  4  »i 


Sjr-I  ,     .     r-   1    b£  a .     Z  If.  o 
■  y.  —  k 


•^.~4^4»-  4 

+j  g  4  a  »••  a  M  > 

c^.j~r:^*'4£*.4 


u     >  to     r* 

,_:  c  4     o>  cd     S 


4  tfl 

4  4» 


CHAPTER    XXIX 

THE  GOLD  SHIP— HOW  A  NATION  PAYS  ITS  DEBTS  TO  FOREIGN 

COIN  TRIES. 

Xot  Enough  Actual  Money  in  the  World  to  Conduct  its  Business  on  a  Cash 
Basis  for-  a  Single  Day — How  the  Exchange  of  Commodities  Equalizes 
Everything — Explanation  of  "'Balance  of  Trade"  and  Foreign  Exchange. 

Every  ykak  millions  of  dollars'  worth  of  products  of  the  soil,  mints,  factories, 
etc.,  are  shipped  from  this  country  to  other  countries  of  the  world.      In  return 

other  countries  send  to  the  United  States  millions  of  dollars'  worth  of  their  prod- 
ucts.    This  is  foreign  trade. 

The  reason  why  this  trade  exists  is  because  we  are  able  to  offer  foreign 
people  commodities  that  we  produce  on  better  terms  than  perhaps  they  could 
produce  them;  while  in  return  foreign  people  have  certain  commodities  which 
we  need  hut  perhaps  cannot  produce  to  as  good  advantage  as  the  people  of  other 
countries.  In  an  ideal  state  of  foreign  trade  sales  would  just  balance  pur 
chases,  for  then  it  would  he  apparent  that  we  were  exchanging  what  we  did 
not  need  for  just  what  we  did  need.  This,  however,  is  not  always  the  case, 
although  over  a  long  range  of  years  imports  may  almosl  balance  exports.  When 
exports  are  in  excess  of  imports  the  balance  is  said  to  he  in  favor  of  this  coun 
try,  for  it  is  generally  supposed  that  it  is  better  to  sell  than  to  huv.  This, 
however,  is  reaHy  not  good  logic,  for  business  is  reciprocal  that  is.  there  i- 
never  a  buyer  without  a  seller.  Therefore  if  a  country  did  not  expect  to  take 
something    in    return    for   its    exports   of   commodities    it    could    not    expect    other 

countries  to  buy  of  it. 

Now,  for  years  the   United   States  has  enjoyed  •••   great   excess  of  exports 

Over  imports   in   its   foreign   trade.       This  has  been  due  almost    wholly-   to  the   fact 

that  this  country  has  been  considered  the  granarj  of  the  world  and  that  other 
countries  depended  largely  upon  our  grain  to  \'r,t\  themselves  and  to  a  similar 
ixfcnt  upon  our  cotton  to  clothe  themselves.  Eliminating  these  food  products 
and   raw    materials   from  consideration,   it    will   be   found   by   comparison    that    the 

government  statistics  of  imports  and  exports  for  ;i  number  of  years  do  almost 


346  THE    COLD    Mill'. 

balance.  For  instance,  during  the  government  year  of  1903,  while  our  exports 
to  foreign  countries  amounted  to  the  enormous  sum  of  $1,892,231,302,  hut 
deducting  the  amount  of  agricultural,  mining,  forest  and  fishery  products,  the 
amount  exported  was  $413,955,747.  On  the  other  hand,  that  year  we  imported 
a  total  of  $1,007,960,1 10  worth  of  commodities,  but  by  deducting  $595,691,586 

for  crude  materials,  li\i  animals  and  food  it  is  seen  that  the  imports  were  $412,- 
278,524,  or  almost  the  exact  balance  of  the  exports. 

Further  examination  into  statistic  would  seem  to  point  definitely  to  the 
existence  of  a  law  of  equal  exchange.  This  law  apparently  rules  that  if  we 
expect  to  sell  we  must  expect  to  buy  in  return.  We  may  tap  new  markets  for 
a  time  or  develop  trade  in  China  or  South  America,  but  the  tendency  cannot 
always  be  in  one  direction. 

There  are  times,  however,  when  the  country  as  a  whole  may  be  a  great  cred- 
itor or  a  great  debtor  nation  to  other  countries  of  the  world.  The  phenomenal 
growth  of  wealth  in  the  United  States  has  tempted  foreigners,  especially  Euro- 
peans, to  buy  heavily  of  stocks  and  bonds  in  the  great  railway  and  industrial 
companies  of  the  country.  When  the  great  industrial  boom  began  after  the 
election  of  President  McKinley,  much  of  the  funds  which  went  to  build  up 
this  boom  came  from  Europe.  Indeed,  at  one  time  Europe  loaned  as  much  as 
$500,000,000  to  the  business  interests  of  this  country,  ami  it  was  largely  due 
to  the  desire  of  European  capitalists  to  get  back  the  money  on  these  loans 
that  brought  about  the  great  stock  market  panic  during  1903.  At  a  time 
when  this  country  finds  it  has  not  enough  cotton  or  wheat  or  corn  to  ship  abroad 
and  exports  in  such  commodities  fall  materially  the  balance  of  trade  is  said  to 
be  against  the  country,  for  imports  into  the  country  may  exceed  exports  out 
of  it. 

There  is  a  constant  stream  of  business  transactions  under  way  to  equalize 
the  balance  of  trade.  This  process  is  what  may  be  termed  international,  or 
foreign  exchange  and  is  conducted  by  international  banking  houses.  If  the 
big  packers  at  Chicago  ship  great  quantities  of  beef  to  Europe,  they  person- 
ally, of  course,  want  money  in  payment.  But  the  wine  merchants  of  France, 
the  carpet  manufacturers  at  Brussels  or  other  foreign  business  men  have  sent 
t  quantities  of  their  goods  to  this  country  and  they  desire  money  also. 
Souk  times  gold,  the  money  of  the  world,  is  exchanged,  but  it  costs  so  much  to 
ship  it  that  unless  it  is  needed  more  than  anything  else  the  foreign  exchange 
bank*  rs  try  to  make  the  amounts  due  from  the  shipments  of  beef  cancel  those 
due  from  the  imports  of  laces,  carpets,  wines,  etc.      And  this  is  foreign  exchange. 

Of  course  what  takes  place  j>  not  the  actual  cancellation  of  shipments  against 


THE  GOLD  SHIP.  847 

imports,  though  it  amounts  to  that  in  the  long  run.  What  docs  take  place  is 
that  the  Chicago  packer  draws  a  bill  of  exchange  against  the  European  pur- 
cliaser,  due  probably  in  London,  the  money  center  of  the  whole  world.  This 
bill  of  exchange  is  made  transferable  and  being  good  for  a  certain  amount 
of  money  is  sold  to  an  international  banker  at  a  slight  discount  for  the  trouble 
of  collecting.  Now,  possibly  in  Chicago,  some  great  dry  goods  man  like 
Marshall  Field  wants  to  pay  for  a  bill  of  goods  he  has  received  from  Europe. 
He  seeks  out  to  find  just  such  a  bill  of  foreign  exchange  as  the  Chicago  packer 
has  sold  to  the  banker.  This  lie  purchases  at  perhaps  a  slight  expense  for  the 
trouble  to  the  banker  for  arranging  the  transaction  and  may  send  it  to  his 
European  business  associate  in  payment  for  the  goods  he  has  bought. 

Sometimes  capitalists  wish  to  lend  money  in  another  country,  and  then 
rather  than  ship  gold  over  to  that  country  they  will  simply  sell  lulls  of  exchange 
on  that  country,  which  is  equivalent  to  placing  credits  there.  Most  of  these 
bills  are  on  London  bankers  or  their  correspondents  and  the  result  is  that  event- 
ually they  balance  through  the  banks  of  that  city. 

When,  however,  conditions  are  such  that  more  money  is  needed  in  Europe 
In  pay  what  is  owed  from  this  country,  gold  actually  has  to  be  shipped.  The 
cost  of  money— that  is,  the  interest  rate-  is  a  considerable  factor  in  such  nego- 
tiations. Sometimes  money  may  be  scarce  in  one  country  and  interest  rates 
high.  Then  the  bankers  of  another  country  see  an  opportunity  to  make  good 
interest  by  sending  money  or  credit — to  that  country.  This  may  be  done  by 
selling  bills  of  exchange,  but  sometimes  the  actual  gold  is  shipped.  When  this 
is  done  it  i>  almost  always  the  case  that  the  balance  of  trade  referred  to  here 
is  iii  favor  of  the  country  receiving  the  gold — that   is  that   country  has  sold   more 

commodities  abroad  than  it  has  purchased. 

(iold  shipments  are  among  the  most  interesting  money  movements  known 
to  banking.  In  tin  first  place  there  i->  considerable  risk  is  shipping  the  money. 
The  ship  may  In-  lost  in  a  storm  or  be  burned  at  sea.  The  shipments  are  g.n 
erally  in  large  amounts,  for  unless  conditions  warrant  a  pretty  steady  flow  of 
gold  from  one  country  to  another  for  at  least  a  short  period,  foreign  exchange 
banker8   will    take   the   ri8k   <>t    selling  bills  "short"      g    sort    of  speculation   in   the 

hope  thai  conditions  will  change  soon  and  the}  ma\  "cover"  the  bills  at  a  profit 
h\   buying  bill-  offered  l>\   some  one  else   it  a  profitable  figure. 

The  risk  ol  these  shipments  can  readih  be  seen  when  it  i-  known  that  early 
in  1905  the  French  liner  "La  Champagne"  carried  from  New  York  over 
$9,000,000  in  gold  in  one  shipment  destined  lor  Paris  to  furnish  the   French 


:;i,s  THE  GOLD  SHIP. 

bankers  with  money  to  supply  Russia  with  funds  with  which  to  carry  on  the 
great  war  with  Japan.  Thai  amount  was  only  a  little  less  than  1  per  cent  of 
all  the  gold  in  circulation  in  the  United  States. 

Hut  this,  while  it  costs  much  for  insurance  against  outright  loss,  docs  not 
worrv  the  bankers  nearly  so  much  as  the  Ions  of  metal  by  abrasion.  It  is  well 
known  that  when  coins  are  carried  for  a  long  time  they  wear  very  thin.  In 
>uch  metals  used  for  money,  as  silver  and  copper,  (his  is  not  so  serious  as  in 
gold,  for  gold  goes  by  its  weight  everywhere,  and  other  coins  arc  only  repre- 
sentatives of  tlu'  actual  money,  just  as  paper  generally  is  the  representative  of 
gold  money.  Now,  with  gold  wearing  down  at  this  rate,  it  is  a  fact  that  a  big 
shipment  of  the  preeiou>  yellow  metal  will  cause  enough  rubbing  together  to 
wear  away  a  visible  amount  of  gold,  measurable  in  dollars  and  cents  lost.  In 
order  to  save  as  much  loss  ;ls  possible,  for  such  a  loss  is  a  dead  one,  the  hankers 
generally  ship  gold  in  the  form  of  bars,  secured  in  this  country  principally  at 
the  New  York  assay  office.  When  the  supply  of  these  bars  runs  out,  as  it  docs 
sometimes,  the  actual  gold  coin  is  shipped.  This  is  usually  called  a  specie 
si  ipment.  Such  was  the  nature  of  the  $9,000,000  load  referred  to  here.  In 
this  case  if  the  ship  had  been  lost  at  sea  every  man.  woman  and  child  in  the 
United  States  would  have  had  to  get  along  with  11  cents  less  money  in  circu- 
lation. But  besides  these  risks  and  losses  there  is  that  of  interest.  When 
money  is  on  the  water  it  cannot  do  anyone's  bidding  to  earn  more  money. 
This  loss  is  considerable.  Indeed  this  special  shipment  to  Paris,  one  of  the 
largest  in  history,  by  the  way.  cost  about  $!58,000.  And  yet  the  foreign  demand 
foi  gold  for  Russia  and  other  needs  was  so  great  that  foreign  bankers  paid 
interest  on  the  money  while  it  was  in  passage. 

The  serious  question  now  with  bankers  is  whether  it  is  worth  while  to  risk 
so  much  of  tin'  world's  wealth  in  shipping  it  across  the  ocean.  If  there  should 
be  some  great  amount  lost  in  transit,  probably  some  readjustment  would  be 
made  so  that  this  transfer  would  cease.  Certainly  it  seems  that  in  this  great 
twentieth  century   of  time  saving  and     labor-saving    devices,    the    commercial 

Ms  of  the  age  OUght  to  be  able  to  establish  some  system  of  international 
finance  that  would  reduce  to  a  minimum  these  shipments  of  gold  across  the 
Atlantic   and    Pacific  oceans. 

It  is.  as  a  general  thing,  during  the  spring  that  gold  is  sent  from  this  coun- 
try to  Europe,  for  frequently  we  are  then  paying  for  purchases  made  abroad, 
while  in  the  fall  Europe  generally  sends  us  gold,  for  then  we  are  shipping 
great  quantities  of  grain  and  cotton  and  Europe  is  paying  for  them. 


THE  GOLD  SHIP.  349 

What   the    World   Drinks — Millions  of  Gallons  of   Tea,   Coffee  and  Alcoholic 
Beverages  Consumed  Each    Year  by  the  Nations  of  the   World. 

When  a  person  sits  sipping  his  or  her  coffee,  tea,  wine  or  beer  quietly  at 
mealtime,  little  consideration  is  given  to  the  total  amount  of  these  beverages 
consumed  each  year  by  the  peoples  of  the  world.  But  the  industries  of  placing 
these  beverages  before  the  consumers  is  of  great  magnitude  and  the  con- 
sumption is  of  almost  fabulous  proportions.  The  United  States  government 
has  prepared  statistics  on  the  question  and  the  figures  show  that  the  United 
Kingdom  of  Great  Britain  and  Ireland  is  first  in  the  consumption  of  tea; 
the  United  States  first  in  coffee-drinking;  Germany  first  in  the  consumption 
of  beer;.  Russia  first  in  the  matter  of  drinking  whiskey  and  other  distilled 
spirits,  and  France  first  of  the  wine-drinkers.  The  other  countries  compared 
were  Spain.  Italy,  Austria  Hungary,  Portugal,  China  and  Argentina. 

Tea  consumption  in  the  twelve  countries  named  aggregated  in  1904-,  over 
510,000,000  pounds.  Of  this,  the  consumption  in  the  United  Kingdom  was 
256,500,000;  Russia,  127,333,000;  United  States,  109,666,000,  and  Germany, 
7,000,000. 

Of  coffee,  the  world's  consumption  is  approximately  2,250,000,000  pounds. 
In  this  the  United  States,  as  already  indicated,  holds  the  first  place,  with  a  total 
consumption  in  1901  of  961,000,000  pounds;  Germany  second.  397,000,000; 
France  third,  168,000,000;  Austria-Hungary  fifth,  108,666,000;  Italy  sixth. 
89,000,000,  and  the  United  Kingdom  seventh,  29,500,000  pounds. 

The  statistics  of  beer  consumption  are  available  for  only  eight  countries, 
with  a  total  of  5,753,000,000  gallons  annually.     Germany  had  a  total  consump 
tion  of  1,783,000,000;  the  United  Kingdom,  1,501,000,000;  the  United  States. 
1,494,000,000;    Austria,    192,000,000;    frame,   289,000,000;    Hungary,   :5s. 
888,000,  and    Italy,  6,750,000. 

Tin-  consumption  of  whiskey,  brandy,  and  other  distilled  spirits  in  the  eight 
countries  for  which  statistics  are  available  amounted  to  687,000,000  gallons — 
ih.it  for  Russia  being  ><t  down  at  174,000,000  gallons;  Germany,  124,333,000; 
the  United  States,  121,000,000;  Austria,  82,500,000;  France,  72,333,000;  the 
United  Kingdom,  58,883, ;  Hungary,  1-3,500,000,  and  [taly,  11,000,000. 

Wine   consumption    in    the    nine   countries    I'm-    which    statistics   arc    presented 

amounts  to  3,090,000,000  gallons  annually,  principally  in  the  Latin  countries. 
Prance  alone  consumes  1,343,000,000  gallons  annually;  [taly,  928,500,000; 
Spain,  381,500,000,  and   Austria  Hungary,  281,000,000;   Germany   consumes 


850  THE  GOLD  SHIP. 

l  >j  1.000,000  gallons  of  wine  annually;  Portugal,  nearly  72,000,000;  the 
United  States,  tS,883,000,  and  the  United  Kingdom,  16,666,000. 

The  per  capita  consumption  of  the  various  beverages  in  the  principal  coun- 
tries presents  some  sharp  contrasts.  Thus,  in  the  per  capita  consumption  of  tea 
the  United  States  is  credited  with  !>ut  1.84  pounds  as  againsl  six  pounds  for  the 
United  Kingdom;  while  in  the  other  countries  presented  the  annual  consumption 
per   head  of  population   is  in  each  ease  less  than  one   pound. 

In  the  per  capita  consumption  of  coffee  the  relative  rank  of  the  countries 
named  is:  United  States,  11. 75  pounds  per  head  of  population;  Germany, 
().().">  pounds;  France,  L29  pounds;  United  Kingdom,  0.69  pound,  and  Rus- 
sia, 0.15   pound. 

Of  beer  the  per  capita  consumption  iii  the  latest  available  year  was  as  fol- 
lows: United  Kingdom,  35.42  gallons  (thus  exceeding  Germany  with  her  30.77 
gallons);  Austria-Hungary,  20.36  gallons;  United  States.  18.28  gallons; 
France  7.41   gallons,  and  Russia,  1.08  gallons. 

The  United  States  (1.48  gallons),  United  Kingdom  (1.38  gallons),  France 
(1.85  gallons),  and  Russia  (1.26 -gallons)  differ  little  in  their  per  capita  con- 
sumption of  distilled  spirits.  In  wine,  however,  the  per  capita  consumption 
varies  greatly  among  the  various  countries,  from  a  minimum  of  0.39  of  1  gallon 
in  the  United  Kingdom  to  34.73  gallons  in  France,  while  the  other  countries, 
arranged  in  the  ascending  scale,  stand,  United  States.  0.53  of  1  gallon;  Ger- 
many, 2.08  gallons;  Hungary,  3.75  gallons;  Austria.  5.85  gallons;  Portugal, 
14.12  gallons:  Spain  17.N2  gallons,  and    Italy,  28.06  gallons. 


CHAPTER    XXX 

TOIL  VERSUS  LUXURY. 

Millions  Wasted  by  the  Rich  in  Shameful  Extravagance,  while  Children  of  tlic 
Poor  Work  for  Nine  Cents  a  Dan — A  Fifteen  Million  Dollar  House — Evils 
of  the  Sweating  System  in  Large  Cities. 

Ii  there  is  any  one  thing  which  is  causing  thinking  people  to  pause  in  their 
busy  modern  lives  to  consider  in  this  day  of  the  "square  deal"  it  is  the  great 
disparity  between  the  rich  and  the  poor,  between  those  who  toil  in  the  endless 
struggle  to  gain  a  hare  existence  equal  to  that  of  the  lowest  animal  and  those 
who  daily  squander  immense  fortunes  in  extravagance  and  luxury.  That  the 
saying  "the  rich  are  growing  richer 
and  the  poor,  poorer"  is  only  too 
well  founded  in  fact  is  apparent  to 
those  who  consider  tin  lives  of  the 
multimillionaires    and    those    of    Mr 

victim-   (if    the   evil   sweatshop   system. 

Governmenl  statistics  alonethrow 
a  great  light  on  this  condition.  The 
Bureau  of  Statistic-  iii  a  bulletin 
showing  importations  into  the  coun- 
try classed  "luxuries  and  article.-  of 
voluntary  use"  reports  these  imports 
in  1890  a1  $129,1  1-7,547  and  in 
L904  .it  $187,099,554.  In  the  in- 
terim   the   value   went    a-    low   a-   $78, 

541,889    in     1896    and    .,-    high    a- 


THE     WORLDS     LARGEST     CAMERA. 


Today    photography    is    recognized    ;iiii 
an  Industry,  :i  science,  and  an  art.     The  public 
dema mis     i ■  .      Musi  ra i  ions     for     its 

books,    remaining     no    longer    contented     with 
Imaginative   views,     The  camera   shown   meas- 
'.:iii    by   four  and  one-half   feet,   and  one 
nsltlve    plate    for  ■■>    single   photogrnphlc 

S 1  II  .'H  I  .:' '  :    in     MM».>.    but     between      eon i      -  n     ,      n.,i    foi    birdaeye 

.        .       .  views   of  cltioi      I  id    n i huh - 

tin      year     at      the     beginning     <>l      tin        facturing  plants,  etc     Some  of  the  photographs 

in    this   booh    were   made   by   It. 
period  and  t  hat  at  t  hr  end  I  here  w  as 

an   increase  of  less  than  $8,000,000.     In  tin    meantime  there  \\as  no  doubl   an 

advance  in  the  consumption  of  Buch  article-  that  more  than  kept  pace  with  the 

increase   in    population.     Tin-   necessarily   denotes   more   than   a    proportionate 

increase   in    their   production,    it    home.      During  the   period   of   fourteen    years 

:5.~)l 


TOIL  VERSUS  LUXURY. 


* 


•  In  importation  of  articles  classed  as  "manufactures  ready  tor  consumption" 
idvanced  only  from  aboul  $150,000,000 to $158,000,000, while  the  importation 
of  manufacturers9  materials,  raw  and  partly  manufactured,  advanced  from 
$28  1,000,000   to  $478,000,000.      From   these  materials  luxuries  and   articles  of 

voluntary  use,  as  well  as  articles  of  necessity  and  comfort  or  convenience,  were 
made. 

Diamonds  were  one  luxury  of  which  the  importation  increased  from  $1,500,- 
ooo  in  1890  to  $23,750,000  in  1904,  but  we  do  not  produce  diamonds.     Of 

those  imported  last  year,  $1 0,000,- 
000  worth  were  uncut  and  were  in  i 
sense  the  raw  material  for  labor  and 
skill.  The  value  of  jewelr}'  and 
precious  stones  other  than  diamonds, 
imported  from  abroad,  fell  from 
$10,189,202  in  1896  to  $5,548,224, 
but  the  domestic  production  of  jew- 
elry has  largely  increased.  The  cen- 
sus shows  that  the  capital  employed 
in  the  manufacture  increased  from 
$11,000,000  in  1880  to  $22,000,000 
in  1890  and  $28,000,000  in  1900, 
while  the  advance  in  the  value  of  the 
product  in  these  two  decades  was 
from  $22,000,000  to  $34,750,000, 
and  then  to  $46,500,000.  Practi- 
cally all  of  this  was  for  home  con- 
sumption. There  was  a  still  more 
striking  advance  in  the  production 
of  silks,  for  which  the  material  is  all 
imported.  Our  importation  of  silk 
manufactures  fell  off  from  $41,085,- 
990  in  1890  to  $31,030,522  in  1904.  Again  taking  the  census  years,  we  find 
that  the  number  of  establishments  engaged  in  silk  manufacturing  in  1880  was 
3S2,  and  the  value  of  the  product  $41,000,000.  In  1890  there  were  472  estab 
lishments  and  a  product  valued  at  $87,299,454,  while  in  1900,  with  483  es- 
tablishments, the  product  had  increased  to  $107,256,258.  This  too,  was 
practically  all  for  home  consumption.  In  the  last  four  years,  from  1900 
to  1904,  the  importation  of  raw  silk  increased  from  8,209,818  pounds,  valued  at 


PHOTOGRAPHING  PROM  HIGH  IN  THE  AIR. 

This  is  a  photographic  tripod  200  feet  high 
In  making  birdseye  views  of  manufac- 
turing plants  and  small  towns.  Views  includ- 
ing thousands  of  men  and  women,  actually 
izable  by  their  friends,  can  be  made 
when  occasion  demands.  The  tower  is  tele- 
scoplc  in  construction,  of  seven  sections  of 
:_■  feet  each.  The  tower  is  held  erect  by  24 
stf-el    cables. 


TOIL  VERSUS  LUXURY.  853 

$31,790,531,  to  16,578,005  pounds,  valued  at  $54,879,276.  The  importation 
of  wines  in  1890  amounted  to  about  $10,000,000  and  had  increased  but  slightly 
in  fourteen  years,  hut  domestic  production  increased  from  $24,000,000  to  $38,- 
500,000. 

If  these  figures  mean  nothing  to  the  average  reader,  let  us  turn  to  observe 
some  of  the  many  luxuries  about  the  many  $5,000,000  homes  of  our  million- 
aires. With  the  tremendous  growth  of  private  fortunes  in  recent  years  it  Is 
not  surprising  millionaires  who  have  nothing  else  to  do  with  their  money  should 
spend  it  upon  palatial  residences.  Nowhere  in  Europe  can  such  extravagance  in 
this  direction  he  found  as  in  the  groups  of  residences  of  the  well  known  finan- 
ciers of  New  York.  Twenty-five  years  ago  $1,000,000  was  supposed  to  he  the 
limit  of  expense  for  a  private  dwelling,  hut  today  the  million-dollar  mansion 
is  somewhat  commonplace.  Andrew  Carnegie's  Fifth  avenue  house  is  said  to 
have  cost  $2,000,000  and  that  of  Charles  M.  Schwab  $3,000,000.  But  that 
of  Senator  William  A.  (lark,  lately  of  Montana,  so  far  outshines  everything 
else  as  to  cost  somewhere  mar  $15,000,000.  To  give  an  example  i^i'  the  luxury 
in  which  tin-  modern  millionaire  lives  it  may  he  worth  while  to  describe  some  of 
the  appointments  of  this  most  luxurious  of  private  palaces  of  the  world. 

About  $5,000,000  will  he  spent  on  Clark's  house  itself,  while  interior  finish- 
ing and  furnishings,  art  work,  etc.  will  come  to  about  $10,000,000  more.  Then 
will  he  120  rooms  in  the  house  when  it  is  completed,  to  say  nothing  of  twenty 
bathrooms.  It  will  have  accommodations  equal  to  those  of  a  great  public  build 
ing.  Inside  this  palace  will  he  three  distinct  domiciles,  entirely  apart  and  sepa- 
rate from  the  main  establishments,  each  with  its  private  dining  room  and  inde- 
pendent communications  will:  the  kitchens.  Thus  three  families  may  stay  in 
the  palace  ;'--  guests  -it  one  time  without  rubbing  elbows.  The  lining  of  each 
bathroom  is  of  Carrara  glass  and  this  costs  $2,000  each,  or  $30,000  for  the 
fifteen  private  hath--.  In  the  basement  a  fully  equipped  Turkish  hath  is  found, 
lined  with  the  same  glass,  with  seats  and  benches  of  marble  and  with  a  vaulted 

ceiling  tiled   in    mosaic.      Here  there   is  a  "plunge'"   for   swimming,   which   is  sup- 
plied  with   flowing  filtered   water.     Numerous  attendants  are  always  at    hand. 
Aboul  $250,000  worth  of  bronzes  are  used  in  the  building.     Senator  Clark  had 
to  establish  or  buy  six  bronze  and  marble  works  to  (il   up  his  palace  with  lux 
urious  •'  ppointments. 

Hut  Buch  needless  display  of  wealth  i--  not  the  only  shocking  contrast  with 
the  poverty  of  our  congested  cities.  The  manner  in  which  the  rich  indulge  in 
luxurious  pastimes  and  dress  i-  i  striking  commentary  <>n  the  shameful  misuse 
of  wealth   today.      \f   Borne  of  the  fashionable  entertainments  <>f  the  rich  the 


:;m  TOIL  VERSUS  LUXURY. 

"souvenirs"  by  waj  of  noveltj  are  stacks  of  chips  worth  fifteen  dollars  each  ;it 
some  exclusive  gambling  resort.  It  is  recounted  thai  at  a  dinner  given  by  a 
prominent  speculator  at  the  Waldorf  Astoria  bote]  in  New  York,  neatly  tucked  in 
the  napkin  of  each  guest  were  four  shares  of  United  States  Steel  stock  as  sou- 
venirs. The  tables  of  these  spenders  of  billions  arc  adorned  with  solid  gold  or 
>il\cr  plate  and  some  families  boast  of  china  costing  three  or  four  thousand 
dollars  a  do/en.  While  thousands  of  the  poor  go  without"  shoes  on  their  feet 
there  are  people  who  wear  shoes  costing  $500  a  pair.  The  jewels  that  burden 
the  wives  and  daughters  of  the  wealthy  sometimes  cost  as  high  as  $100^000  for 
one  woman.  A  "simple"  gown  costs  $800  or  so,  and  a  "decent"  toilet  $5,000. 
It  is  not  uncommon  for  a  woman  to  carry  a  fan  costing  $2.50,  and  articles  of 
this  nature  are  frequently  given  away  as  souvenirs  al  great  dinners.  Parasols 
cost  more,  running  often  to  $500.  As  for  bonbons  ami  candies,  a  box  holding 
a    few   pounds   often    sells   at   $50. 

To  contrast  these  phases  of  luxury  with  some  of  those  of  penury  and  toil 
an  example  is  found  in  the  sweating  system.  This  is  the  practice  pursued  by- 
certain  manufacturers,  especially  in  the  clothing  trade,  of  giving  out  work  to 
be  don.  at  home  and  at  starvation  wages.  This  exists  principally  in  large 
cities  where  many  poor  people  are  housed  in  unsanitary  tenement  houses,  and 
in  order  to  get  any  work  at  all  so  as  to  keep  soul  and  body  alive  accept  what- 
ever wages  are  offered.  The  system  now  has  been  changed  greatly  from  what 
it  was  at  one  time,  largely  through  the  insistence  of  the  trade  unions.  The 
term  "sweater"  was  first  used  by  tailors  of  London  who  worked  long  hours. 
Today  the  system  embraces  the  fag  ends  of  many  industries  where  low  wages 
and  bad  conditions  prevail.  The  work  is  always  of  poor  grade  and  the  labor- 
ers are  of  a  very  low  class,  generally  working  under  Jewish  suhcontractors. 
Cheap  cigars,  bread,  candies  and  garments  are  the  principal  products  of  this 
_  ,1,  d  sort  of  toil. 
The  evils  of  the  sweat  shop  are  many,  chief  of  which  are  the  long,  tedious 
and  irksome  hour-:  the  packing  of  both  SCXCS  in  hordes  in  small  rooms,  to  labor, 
and  the  unsanitary  condition-  that  invariably  obtain  under  such  surrounding-. 
Often  the  sweaters  work  eighteen  hours  a  day  with  little  air.  light  or  heat. 
Child  labor  abounds  in  the  system.  Women  about  to  give  birth  to  children  have 
been  known  to  keep  at  their  drudgery  until  the  moment  of  delivery  and  then 
the  only  privilege  granted  was  the  stretching  of  a  curtain  across  one  corner  of 
the  room  while  tin-  child  was  horn,  with  the  meager  assistance  of  a  woman  associ- 
ate in  the  sweat  shop.  Students  of  conditions  which  have  made  tuberculosis  the 
at   white   plague"  have  shown  how    conditions  such  -as  surround  these  places 


TOIL  VERSUS  LUXURY.  355 

kill  ptf  the  working  people  in  great  numbers.  Some  of  the  principal  causes  for 
the  sweating  system  and  its  evils  are  the  excessive  supply  of  unskilled  labor,  the 
great  saving  to  the  employer  by  grinding  down  the  poor  and  avoiding  rent,  and 
the  indifference  to  the  evils  of  the  system  by  employers  and  the  public.  Many 
remedies  have  been  proposed,  among  which  are  severe  legislation,  which  fortun- 
ately is  now  becoming  the  rule,  co-operative  production  by  the  workers,  trade- 
unionism,  public  workshops,  restriction  of  immigration,  etc. 

While  the  sweatshop  is  one  of  the  great  evils  attendant  upon  modern  char- 
itable business  methods,  it  is  not  the  only  one.  In  the  South  the  gnat  bane  of 
labor  is  the  factory  evil.  A  committeee  appointed  to  investigate  child  labor 
reported  that  of  those  employed  in  the  cotton  factories  from  1870  to  1880  the 
number  of  men  over  Hi  years  of  age  increased  92.8  per  cent,  of  women  over  sis 
teen  77  per  cent  and  of  children  under  sixteen  the  increase  was  140.9  per  cent. 
In  tiie  next  ten  years  the  increase  was  21.8  per  cenl  for  men,  269  per  cenl  for 
women  and  106-5  per  cent  for  children.  From  1890  to  1900  the  number  of 
men  increased  70  per  cent,  women  158.3  per  cent  and  children  °,70.7  per  cent. 
Of  a  total  of  about  45,000  textile  workers  of  North  Carolina  in  1001  about 
8,000  were  under  fourteen  years  of  age  and  the  average  wage  that  year  was 
decreased  from  32  cents  to  29  cents  a  day.  The  daily  wage  of  the  factory 
children  of  the  South  is  often  as  low  as  15  cents;  it  is  sometimes  as  low  as  i) 
ci  nts. 

The   "Sand    Rat"     Tin-   Must    PerUowt    Work    In    The    World. 

Imagine    yourself   imprisoned    in    a    floating   tomb    working   at    the   bottom   of 

river  in  search  for  a  -olid  foundation  in  the  sand  of  the  river-bed  on  which 

I,,    erect    a    bridge    and    you    will    have    a    faint     idea    of    the    work    of    the    "sand 

rat",  the  most  perilous  work  in  the  world.  The  "sand  rat,"  who  is  generally 
a  union  man.  is  well  paid,  but  when  one  thinks  of  high  wages  he  need  not 
Ibink  it  is  a  "p.-i\ ing  job,"  for  the  laborer  is  selling  his  time  a1  a  low  figure 
considering  the  fad  thai  daily  almost  human  lives  arc  sacrificed  up  to  the 
demon  Death  who  claims  his  victims  as  the  price  of  the  onrush  of  civilization. 
Thai  the  loss  of  life  in  this  work  is  not  greater  is  really  miraculous. 

Rcccnth  in  the  Mississippi  River,  near  Thebes,  III  .  five  caissons  were  sunk 
uith  the  phenomenal  record  of  not  a  life  lost.  Bui  this  was  exceptional. 
These  caissons  are  like  huge  dry  goods  boxes,  and  usually  they  are  built  on 
"ways"  and  launched  in  the  river  like  a  Bhip.  Then  the)  are  floated  to  the 
position  they  are  to  occupy  over  the  river  bottom  on  which  the  bridge  founda- 


TOIL  VERSUS  LUXURY. 


tion  is  to  be  built.  Sometimes  these  caissons  are  as  large  as  JW  oxNii' ._.  feet. 
Tin  v  are  calked  with  oakum  so  thai  not  a  drop  of  water  can  Irak  through 
them  and  a  tVu  feel  up  from  the  bottom  edge  of  the  box  is  a  scries  of  steel 
arches  running  crosswise  and  secured  to  the  sides  of  the  box.  The  box  has  a 
ceiling  of  concrete  and  below  this  is  a  greal  air  chamber  in  which  the  "sand 

rats"   work.     Near  the  center  of  the  concrete  ceiling  of  the  caisson   are  set    steel 


Upwards   of   4.000,000   sheep   arrive  at   the   Chicago  Stock  Yards   annually — which    means 

that   there   is   also   that   number   of   pelts — one  of  the  most   valuable  parts  of  the  animal,    to 

ken  care  of  by  proper  processes.     The  fleece  is  spun   into  yarn  for  making  our  clothes, 

while  the  skins  are  tanned  into  leather  and  used  for  various  purposes,  one  being  the  binding 

■  ks. 

tubes  running  down  into  the  air  chamber.     One  of  these  is  arranged  so  that  a 

stout  man  can  get  into  and  out  of*  the  air  chamber.  Others  are  to  permit 
the  removal  of*  dirt  and  stone  excavated  and  to  admit  material  for  construction 
of  tin  foundation  work.  Each  of  these  tubes  is  equipped  with  an  air  lock,  so 
thai  man  or  material  may  he  lowered  or  taken  out  of  the  threat  submerged 
bos  without  the  escape  of  compressed  air  which  the  caisson  should  hold  all  the 
time. 


TOIL   VERSUS   LUXURY. 


J357 


When  the  apparatus  is  ready  for  work,  the  caisson  is  floated  into  position, 
the  air  is  pumped  into  the  air  chamber  and  on  the  top  of  the  caisson  masons 
build  a  huge  stone  pier.  The  weight  of  this  masonry  soon  sinks  the  caisson  to 
the  bottom  of  the  stream  in  the  position  it  is  to  occupy  for  building  the  founda- 
tions. So  carefully  has  the  mason-work  been  constructed  that  the  huge  box 
does  not  topple  over,  but  settles  slowly  and  evenly  and  the  great  weight  anchors 
it  firmly  to  the  bottom.  Then  the  work  of  the  "sand  rats"  begin.  They  have 
descended  through  the  tubes  into  the  air  chamber  and  they  dig  into  the  sand 
a  great  excavation  just  large  enough  to  permit  the  caisson  to  fit  snugly  into 
the  ground.  The  men  live  in  this  caisson  practically  till  the  pier  has  been  fixed 
to  the  earth.  The  task  they  perform  is  done  under  much  the  same  conditions 
a-  that  in  a  diving  bell.  They  can  cut  rock  and  blast  it  and  dig  up  the  sand. 
All  the  time  they  Mini  unmindful  of  the  great  peril  in  which  they  exist. 


STEAM  TRACTION  ENGINE  PLOW. 


CARROLL    D.     "WRIGHT, 
United    States    Commissionei    of    Labor. 


JOHN    MITCHELL. 
President    United    Mine    Workers    of   America. 


SAMUEL   GOMPERS, 
lent     of     the     American     Federation     of 
I^abor. 


FRANK    P.    SARGENT, 


United    States    Commissioner    of    Immigration, 
Cormerlj    Grand   Master   iirotherhood 

■  i     Locomotive    Firemen. 


CHAPTER    XXXI 
MUSCLE  AGAINST  MONEY. 

Where   the   "Square   Deal"   Doctrine   Should    Rule   at   All   Times     Growth   of 

Organization    in    the    Industrial     World — Labor    Legislation—  Child    Labor 
and  the  Laic.       The    War   Between    Capital   and    Labor. 

Today  the  most  glaring  examples  of  a  situation  where  the  true  American  doc- 
trine of  the  "square  deal"  should  be  the  rule  of  practice,  but  almost  invari- 
ably is  absent,  arc  to  be  found  in  the  remorseless,  bloody  and  incessant  struggle 
between  money  and  muscle,  in  the  war  between  capital  and  labor.  It  was 
Impossible,  when  evolution  in  business  was  bringing  forth  monopoly  in  cap- 
ital and  legalizing  it  through  giant  corporations,  mergers  and  trusts,  that  a 
similar  process  should  not  he  taking  place  among  those  who  had  only  human 
strength  to  sell  and  the  sweat  thereof— labor— instead  of  the  capital  of  the 
growing  captains  of  industry. 

So  slow,  however,  was  the  growth  of  organized  and  systematic  labor 
co-operation,  until  recent  years,  that  the  capitalist  paid  little  attention  to  the 
signs  which  indicated  Mich  concentration  of  power  in  the  hands  of  labor 
leaders  as  might  he  dangerous  in  case  it  were  put  to  arbitrary  use.  Rather 
the  capitalist  proceeded  in  hi-  own  quest  for  power  through  monopoly  and 
trust  aggrandizement,  now  and  then  throwing  some  sop  to  the  struggling 
working  man.  until  trade  unionism  the  Labor  Trust  had  gained  such 
headway,  through  organization,  public  sentiment  and  legislative  reform-,  thai 
further  usurpation  of  power  or  demands  by  labor  for  n«w  concessions  brought 
a  systematic  organization  l>\  capitalistic  fore-  to  combat  ever}  movement 
made  by  the  opposing  side. 

This   call    I"   arm-   came   in    the   summer   of    l!)<>:')   and    resulted    in    the    I'onna 
lj(M,  0f  the  Citizens'    Industrial    Association   "I'   America.      And   it    is   this  alii 
..,,,,.,.    ,,)'    more    than    500    business    men's    organizations,    reaching    from    New 
York  to  San  Francisco  and  from  the  Gulf  of  Mexico  t<>  the  Great    Lakes,  that 
now   is  confronting   the   American    Federation   <»t'   Labor   with    its   million   and 
more  members  to  fight  out   the  battle  of  the    classes. 

n,,t  let  ii-  take  the  matte,-  up  nearer  the  beginning.     This  might}  struggle 

359 


360  MUSCLE  AGAINST  MONEY. 

apparently  had  it-  cause  in  the  foundation  of  things.  There  was  a  time  when 
it  was  characteristic  of  certain  writers  on  economic  subjects  wholly  to  ignore 
labor  as  a  factor  In  the  production  of  wealth  and  to  ascribe  ;ill  importance 
to  that  portion  of  capital  accumulated  in  precious  metals.  Even  more  impos- 
sible conceptions  existed  when  slavery  was  tolerated  as  good  morals.  As  a 
matter  of  fact  slave  labor  was  a  basis  for  all  the  early  known  civilizations. 
Then  might  was  right,  and  a  conquered  race  of  human  beings  or  prisoners  of 
war  labored,  while  the  ruling  class,  inevitably  drawn  down  into  degeneration 
by  its  lusts,  extravagances  and  supineness,  was  eventually  overcome  either  by 
new  and  more  vigorous  races  or  by  its  own  slaves.  From  time  to  time  there 
were  more  or  less  definite  struggles  for  such  share  of  the  "might"  by  the 
laboring  class  as  would  give  them  some  new  ••right.'"  In  the  middle  ages,  and 
even  in  a  certain  degree  in  modern  Europe,  the  slave  system  of  labor  was 
known  as  serfdom.  The  serf,  while  being  bound  to  the  land  and  compelled 
to  obey  his  feudal  lord,  had  certain  privileges  which  the  lord  respected.  While 
such  a  system  thrived  under  conditions  that  existed  in  olden  days,  it  was  ill 
suited  as  one  of  the  agencies  that  was  destined  to  bring  forth  the  great  indus- 
trial age.  Therefore  it  gave  way  to  the  system  of  free  labor.  England 
was  the  first  to  profit  thereby  in  the  fifteenth  century;  France  and  Germany 
followed,  and  Western  and  Central  Europe  was  freed  from  serfdom  by  the 
early  days  of  the  nineteenth  century.  Russia  did  not  submit  until  late  in  the 
nineteenth  century.  In  America  the  new  form  of  negro  slavery  was  a  potent, 
factor  in  the  early  development  of  the  South,  but  this  proved  as  intolerable  as 
serfdom  and  culminated  in  the  civil  war  and  the  Emancipation  Proclamation. 

Though  thi'  freedom  of  the  laboring  class  from  legal  slavery  generally  was 
not  effected  until  comparatively  modern  times,  organizations  for  the  better- 
ment of  those  who  were  working  independently  began  with  the  journeymen 
clubs  and  guilds  of  the  Middle  Ages.  The  nucleus  of  modern  trade  unionism 
was  seen  frequently  after  the  fourteenth  century,  when  bodies  of  workmen 
maintained  somewhat  continuous  existence  and  regulated  apprenticeships,  paid 
benefits  and  struggled  with  employers  in  a  manner  that  suggested  perhaps  the 
modern  weapons  of  the  strike  and  boycott.  While  this  development  seemed 
steady  it  was  not  marked  so  lon<4'  as  employees  and  employers  were  so  closely 
allied  a-  to  live  in  the  same  house.  Indeed,  the  trade  union  as  we  find  it  today 
was  largely,  if  not  wholly,  the  result  of  the  modern  factory  system  and  the 
sharply  defined  division  of  labor.  Therefore,  we  may  expect  to  see  trade 
unionism  beginning  to  flourish  about  the  latter  half  of  the  eighteenth  century 
or  early  in  the  nineteenth  century.      This,  in  fact,  is  what   is  found  in  history. 


MUSCLE  AGAINST  MONEY. 


361 


And  it  was  a  struggle  against  great  odds  from  the  first  on  the  part  of  the 
laboring  class — that  is,  the  wage-earning  class  as  distinguished  from  the 
wage-paying  class;  the  latter  may  be  distinctly  of  the  class  that  works,  yet 
gains  its  recompense  by  profits  rather  than  wages. 

In  England  Parliament  was  hostile  to  every  early  combination  of  labor. 
Laws  regulating  wages,  apprenticeship,  etc.,  were  enacted  and  the  trade  unions 
largely  bent  their  efforts  toward  having  these  laws  obeyed — a  thing  which  the 


INTERIOR    VIEW    OF    A   MODERN   MACHINE   SHOP. 

Manufacturers  discriminate  as  much  in  the  employment  of  labor  .is  .in  the  great  fln 
Institutions,      in    this   photograph   you   will    note   the    Indelible    mark   ol    Intelligence  on   every 
man's  face     also  the  general  air  of  cleanliness  and   prosperity. 

employers  frequently  found  il  profitable  nol  to  <l<>.  Al  one  time  laws  in 
England  prohibited  every  kind  of  combination,  whether  of  laborer  or  employer, 
\.  q  matter  of  fact  these  laws  largely  were  aimed  againsl  the  laboring  class 
alone,  and  for  nearly  twenty  live  years  unions  were  driven  into  hiding.  Then 
in  1824,  tin-  Combination  Acts  were  repealed,  and  although  shortly  afterward 
fresh  restrictions  were  enacted,  labor  was  allowed  to  combine  to  regulate  wa 
or  hour-  of  labor.  Hut  with  this  opportunity  for  organization  came  the 
,i    natural   result     outbreaks  of  strikes   thai    were  as  costly   as   they   were 


:;<;-  MUSCLE  AGAINST  MONEY. 

i . 1 1 1  \  unsuccessful.  In  1880  there  began  to  spread  a  socialistic  movement 
which  had  for  its  basis  a  hazj  idea  thai  the  wage  system  should  be  abolished 
and  be  succeeded  l>\  some  scheme  of  co-operative  production.  This  move- 
ment gained  greal  headway,  within  a  few  weeks  the  unions  gaining  half  a  mil- 
lion members.  From  time  to  time  the  movemenl  toward  uplifting  the  masses 
of  laborers  one  way  or  another  changed  form.  At  times  it  took  on  political 
aspect. 

Eventually  the  English  labor  leaders  who  were  most  successful  tried  the 
method  of  organizing  the  unskilled  workers  of  the  large  cities  and,  by  the 
forces  thus  gathered,  to  compel  concessions.  This  method  gained  its  early 
visible  anil  far- reaching  victories  beginning  with  1889,  when  the  famous  Lon 
don  dock-laborers'  strike,  under  the  leadership  of  John  Burns,  was  granted 
public  support.  In  most  of  the  struggles  at  this  time  the  points  at  issue 
were  such  tangible  questions  as  the  plea  for  an  eight-hour  working  day,  san- 
itary factory  regulation,  etc. 

The  movement  in  the  United  States  patterned  largely  from  the  example 
of  England  and  developed  simultaneously  with  it.  As  in  that  country  from 
time  to  time  demonstrations  of  a  political  character  were  seen.  Here  the 
early  history  of  trade  unionism  at  times  was  marked  with  attempts  at  socialism. 
Here  also  the  exclusiveness  of  the  union,  which  was  regulated  principally  for 
individual  trade-,  was  considered  too  narrow  a  policy  for  success,  and  eventu- 
ally this  gave  way  for  wider  movements  and  federations  of  national  scope, 
such  as  the  National  Labor  Union,  which  was  followed  about  1872  by  the 
Knights  of  Labor.  Recently  formed  general  unions  are  the  American  Fed- 
eration of  Labor  with  something  like  27,000  local  unions  and  about  1,500, 000 
individuals  under  its  control,  and  the  American  Labor  Union. 

All  the  time  labor  was  perfecting  its  organization,  until  it  could  wield  such 
power  as   that   of   the   closely   knit    American   Federation   of   Labor,  there   had 

i  a  constant  fight  going  on  for  labor  legislation.  We  know  today  what 
influence  is  to  be  found  in  politics  from  the  labor  vote.  And  former  history 
not  wholly  unlike  that  of  today.  While  the  steps  taken  by  labor  organ- 
izations to  secure  laws  which  would  redound  to  the  benefit  of  all  society  are 
•  t  greal  inter,.),  it  must  suffice  here  to  point  out  a  few  of  the  things  that 
trade  unionism  has  fought  for  successfully.  In  the  main  this  legislation  in 
the  United  States  i>  embraced  in  four  movements-  those  for  the  regulation 
of  the  hours  of  labor,  the  protection  of  health,  the  payment  of  wages  and  the 
liability   of   the   employer.     Today    many    of   tin'   existing   laws   are   conceded 

to    be    wholesome    and     for    the    orood    of    ;ill    concerned;      but     the    enactment    of 


MUSCLE  AGAINST  MONEY.  :3(*3 

these   laws   was   secured   only    by    the   hardest    struggle .  against    the   lobby   of 
employers. 

In  the  matter  of  hour-  of  labor  there  are  few  laws  regulating  the  time  of 
work  of  the  adult  male.  In  April,  190"),  indeed,  the  United  States  Supreme 
Court  ruled  against  a  law  of  the  state  of  New  York  which  had  attempted  to 
limit  the  hour-  of  labor.  On  the  grounds  of  public  health  and  morals  a  law- 
had  been  enacted  which  would  not  permit  work  in  such  branches  of  labor  as 
baking  more  than  sixty  hour-  a  week.  The  court,  however,  found  the  law 
to  be  unconstitutional  and  rendered  the  verdict  in  these  words: 

'•There  is  no  reasonable  ground  for  interfering  with  tlie  liberty  of  per- 
sons or  the  right  of  free  contract  by  determining  the  hours  of  labor  in  the 
occupation  of  a  baker.  Bakers  are  in  no  sense  wards  of  the  state.  Viewed  in 
the  light  of  a  purely  labor  law,  with  no  reference  whatever  to  the  question  of 
health,  we  think  that  a  law  like  the  one  before  us  involves  neither  the  safety. 
the  morals  nor  the  welfare  of  the  public,  and  that  the  interest  of  'the  public  i- 
not  in  the  slightest  degree  affected  by  such  an  act. 

••It  is  a  question  of  which  of  two  powers  or  rights  -hall  prevail — the  power 
of  the  state  to  legislate  or  the  right  of  the  individual  to  liberty  of  person  and 
freedom  of  contract.  The  mere  assertion  that  the  subject  relate-  to  the  public 
health  does  not  necessarily  render  the  enactment  valid.  The  act  must  have  a 
more  direct  relation  a-  a  mean-  to  an  end  and  the  end  it-elf  must  be  appro 
priafe  and  legitimate  before  an  act  can  be  held  to  be  valid  which  interferes 
with  the  general  right  of  an  individual  to  be  free  in  hi-  person  and  in  his 
power  to  COntrad  in  relation  to  hi-  own  labor.  We  think  the  limit  of  the 
police  power  has  been  reached  and  passed  in  tin-  case. 

-The  employe  may  desire  to  earn  the  extra  money  which  would  arise  from 
hi-  working  more  than  the  prescribed  time,  but  this  statute  forbid-  the  employe! 
from  permitting  the  employe  to  earn  it.  It  necessarily  interferes  with  the 
right  of  contract  between  the  employer  and  employe-  concerning  the  number 
of  hour-  in  •which  the  latter  may  labor  in  the  bakery  of  the  employer.  The 
general  right  to  make  a  contract  in  relation  to  his  business  is  pari  of  the 
liberty  of  the  individual  protected  by  the  fourteenth  amendment  to  the  federal 
constitution.  Under  that  provision  no  state  can  deprive  any  person  of  life, 
liberty  or  property  without  due  process  of  law.  The  right  to  purchase  or  to 
-.11  labor  i-  part  of  the  libertj  protected  h\  this  amendment,  unless  there  are 
circumstances  which  exclude  the  right. 

••It  seems  to  us  that  the  real  object  and  purpose  was  simply  I"  regulate 
die   hour-   of   labor  between    the   master  and   hi-  employes,   all   being  men   sui 


S64  MUSCLE  AGAINST  MONEY. 

generis,  in  a  private  business  not  dangerous  in  an_\  degree  to  morals  or  in  any 
real  and  substantia]  degree  to  the  health  of  the  employes.  Under  such  cir- 
cumstances tlif  freedom  of  master  and  employe  to  contract  with  each  other  in 
relation  to  their  employment  and  !n  defining  the  same  cannot  be  prohibited  or 
interfered  with  without  violating  the  federal  constitution." 

If  such  was  the  case  with  men.  however,  it  was  somewhat  different  with 
women  and  children.  For  years  children  as  young  as  rive  years  of  age  were 
worked  at  tasks  that  should  not  have  been  permitted.  In  the  South  today 
man}  cotton  mills  employ  children  even  to  work  all  night.  The  fight,  prin- 
cipally by  the  trade  unions,  has  abolished  much  of  this  and  today  laws  exist  in 
most  >tale^  prohibiting  the  labor  of  children  in  factories,  workshops  and  mines 
In  ton'  a  certain  age  is  reached.  This  age  differs,  some  states  ruling  ten  years 
a  suitable  age  to  begin  drudgery  and  others  twelve  or  fourteen  years.  Restric- 
tion are  generally  placed  on  the  amount  of  work  that  can  be  done  by  children 
of  these  ages.  Even  with  these  laws  child  labor  still  abounds  in  the  United 
Static  to  thi'  impairment  of  the  physical,  mental  and  moral  health  of  the 
community.  Inasmuch  as  the  employing  class  is  permitting  such  abuses  obvi- 
ously  it  depends  largely  upon  the  stronger  portion  of  the  laborers — the  organ- 
izations— to  check  them. 

Tin  case  of  the  woman  laborer  is  somewhat  less  hopeful  than  that  of  the 
child.  Absolute  prohibition  of  female  labor  in  mines  is  found  in  some  states, 
and  restriction  as  to  the  number  of  hours  a  woman  should  work  also  is  found 
in  legislation  in  some  communities.      Generally,  however,  regulation  is  meager. 

In  spite  of  all  the  abuses  seen  today  in  the  sweat-shops  and  other  vile  and 
foid  surroundings  in  which  human  beings  are  compelled  to  work,  progress 
towards  sanitation  has  been  remarkable  since  the  labor  organizations  began 
insisting  upon  reform.  In  every  state  some  sort  of  regulation  has  been  enacted 
into  law.  Some  of  the  acts  provide  for  a  given  amount  of  air  space  to  each 
workman,  for  protection  from  fire,  dangerous  machinery,  etc.,  and  for  fans  to 
remove  poisonous  air,  vapors  or  dust.  Some  laws  go  so  far  toward  the  pro- 
tection of  human  life  as  to  prohibit  the  sale  of  goods  made  in  sweat-shops — 
particularly  clothes  made  up  in  unsanitary  dwellings  or  tenement   houses. 

Akin  to  these  health  laws  are  those  which  make  the  employer  liable  for 
damages  when  an  employe  is  injured  by  accident  other  than  by  negli- 
gence while  actively  under  his  employ.      This  sort  of  legislation   has  been  fiercely 

combatted  by  corporations,  especially  by  the  railways,  and  in  many  instances 
have  been  all  but  nullified  by  other  laws  which  exempt  the  employer  in  case  the 
accident  i»  the  fault  of  a  fellow  workman.      Efforts  now   are  making  to  place  the 


MUSCLE  AGAINST  MONEY.  365 

burden  of  the  responsibility  of  accidents  upon  the  employer,  and  generally  that 

is  the  case  now  with  railway  companies. 

Legislation  looking  to  the  regular  payment  of  wages  at  stated  intervals 
has  been  invoked  in  a  few  states,  but  the  question  of  its  validity  has  been  raised. 
More  general  is- the  law  specifying  that  actual  money  and  not  commodities  shall 
be  paid  in  compensation  for  labor.  These  laws,  of  course,  are  not  by  any 
means  all  that  have  been  enacted  in  behalf  of  labor.  In  their  wake  have  fol- 
lowed acts  for  factory  inspection,  employment  bureaus,  and  many  other  func- 
tions of  government,  which,  however,  in  turn  have  been  accompanied  by  adverse 
labor  legislation  providing  against  such  specific  weapons  of  the  trade  unionist 
as  the  boycott,  the  molestation  of  private  business  by  pickets  of  the  unions,  etc. 

The   Labor   Problem. 

Obviously  not  all  the  concessions  desired  by  organized  labor  through  its 
various  agencies  could  lie  secured  by  the  enactment  of  laws.  Statutes  that  were 
as  Loose  as  the  eight-hour  law  of  New  York  would  be  declared  unconstitutional 
as  fast  as  they  might  be  made.  Therefore  the  wage-earning  class  had  access 
to  other  mean-  I.,  solve  its  side  of  a  knotty  problem.  And  before  we  go  further 
in  this  matter  we  may  as  well  point  out  on..'  or  two  fundamental  questions  which 
lie  at  the  basis  of  what  is  termed  the  labor  problem.  Generally  speaking,  the 
principal  stumbling  block  to  amicable  relations  between  the  employer  and 
employe,  between  capitalists  and  laborer,  has  been  the  matter  of  the  equitable 
distribution  of  the  results  of  the  combined  forces  of  capital  and  labor  in  other 
words,  the  question  of  the  division  of  the  wealth  produced.  Hut  while  this  has 
been  one  of  the  main  questions  for  dispute,  it  has  been  founded  in  something 
perhaps   even    more    fundamental       the   conception    on    the    pari    of    the    workman 

thai  he  has  a  birthright,  bj  reason  of  hi-  very  existence,  which  calls  for  not 
only  tolerable  existence  here  on  earth  but  some  of  the  positive  good  things  of 

life.       Perhaps    the    majority    of   organized    laborers    themselves    do    not    definitely 

understand  the  instinct  which  surges  within  them,  working  toward  the  evolution 
of  a  high)  r  t  \  pe  of  man.  Hut  this  instind  exists,  it  seems,  in  a  gnat  measure, 
and  appears  to  be  growing  into  almost  a  sixth  sense  witli  those  who  are  finding 
greatest  difficulties  to  attain  to  something  of  a  higher  developmenl  which  the 
Ian  of  evolution  demands.  [Jndcr  these  circumstances  there  has  developed 
apparently  without  unnaturalnesa  an  intuition  to  "fighl  for  the  cause."  The 
trade  unionist  says  that  the  moment  wage-  are  raised  to  meet  a  demand  of 
j. ,!„„.,  th«  price  of  the  commodity  produced  also  is  raised,  thus  cancelling  the 


866  MUSC1  E  AGAINST  MONEY. 

first    gain.      It    shorter  hours  of  work   are  granted   the  concession   is  offset    in 
some  similar  fashion. 

The  development  of  the  class  instinct  with  the  capitalist  is  identical.  The 
righl  of  free  contract  has  been  guarded  with  such  jealousy  that  any  attempt 
to  infringe  upon  it  meets  with  such  force  as  is  available  to  the  allied  millions 
of  capital's  wealth.  The  Capitalist  says  he  cannot  continue  to  operate  a  busi- 
ness unless  there  is  a  given  amount  of  profit  in  the  business  to  him.  He 
threatens  to  retire  from  business  if  "labor  becomes  too  exacting,"  and  he  fre- 
quently carries  out  his  threat.  But  labor  replies  that  today,  with  wealth  con- 
centrated in  the  trusts,  a  concentration  effected  with  the  people's  savings,  busi- 
ness no  longer  is  a  private  affair  of  the  employer,  but  is  a  matter  of  general 
welfare. 

This  brings  up  the  idea  that  the  workman  has  a  right  to  work  at  bis 
chosen  calling  and  to  be,  in  a  considerable  measure,  the  one  to  decide  on  what 
terms  of  hours,  wages,  etc..  he  shall  employ  himself.  The  capitalist  class,  how- 
ever, combats  this  theory  as  unstable.  The  employer  insists  that  just  so  long 
a-  he  has  command  of  the  tools  of  production,  such  as  money,  land,  etc.,  he 
will  lam  his  '"own  business"  as  he  "sees  fit." 

It  can  be  seen  readily  enough  that  the  lines  on  which  these  two  great  forces 
work  run  parallel  with  each  other  at  best,  and  never  really  approach  each  other. 
It  is  little  wonder  then  that  we  see  actual  war  and  bloodshed  between  these 
classes,  with  riot,  arson  and  mob  rule  on  the  one  side  and  the  adroit  resort  to 
bribery,  legislative  corruption  and  legal  oppression  on  the  other.  On  the  part 
of  the  employer  frequently  there  is  arrogance  and  stiff-necked  pride  against 
submission  to  the  demands  of  labor.  On  the  part  of  labor  frequently  there  is 
the  unwise  conception  that  it  may  be  illegal  to  break  statute  laws,  but  that,  just 
as  this  was  done  at  the  Boston  Tea  Party  and  at  the  Declaration  of  Independ- 
ence, in  order  to  enforce  a  moral  law.  so  today  the  oppression  of  modern  George 
tin  Thirds  may  call  for  extreme  measures.  And  now  of  one  party  and  now  of 
another,  and  often  between  both  upper  and  nether  millstone,  there  is  a  mass  of 
people   who  demand  that    evolution   come  by    peace  and    not    by   revolution. 


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CHAPTER    XXXn 

WEAPONS  OF  THE  LABOR  TRUST— THE  STRIKE  AND  BOYCOTT. 

The  Arms  and  Ammunition  of  the  Conflict — Skilled  versus  Unskilled  Labor — 
Some  Historic  Strikes  and  Their  Attendant  Disorders — Methods  of  Attack 
and   Defense. 

Having  organized  with  an  idea  more  or  less  vague  of  gaining  and  maintaining 

a  higher  standard  of  living,  the  laboring  class  under  the  trade  union  regime 
perforce  needed  weapons  with  which  to  force  their  conceptions  of  right  upon 
the  employing  class.  Unskilled  labor  always  is  in  such  plentiful  supply  that 
the  employer  thought  little  of  making  contracts  with  this  sort  of  workmen. 
The  skilled  workers,  such  as  printers,  carpenters,  machinists,  etc.,  possessed  a 
knowledge  required  and  needed  by  the  employers  and  the  men  gradually  were 
able  to  get  agreements  from  employers.  And  yet  both  skilled  and  unskilled 
men  found  that  they  must  work  in  unity  for  their  common  welfare,  if  they 
were  to  achieve  their  desired  ends. 

In  this  position  two  methods  of  offense  and  defense  developed  spontane- 
ously: the  strike  and  the  boycott.  The  former  weapon  is  the  cessation  of  work 
on  the  part  of  a  large  body  of  Laborers,  acting  in  concert  to  enforce  >onie 
demand  made  upon  employers  or  to  resisl  some  encroachment  of  rights  of  labor 
by  the  employer.  The  boycott  is  the  concerted  action  by  a  body  <>f  workmen 
to   refuse   to  patronize  an   employer  who   is   considered   "unfair"   to   labor  and   to 

prevent  as  far  as  possible  any  one  else  from  patronizing  him.     The  immediate 

weapons   in   the   hands  of   the  employers   which   correspond    to   the   strike  and    the 

boycott  are  the  lockout  and  the  blacklist.     The  lockout   is  the  peremptory  dis 

missal    of  a    large    body    of  employes    by    .in    employer,   either   to    force   a    demand 

or  to  forestall  a  threatened  strike.  The  blacklist  is  the  list  kept  l>\  employers 
containing  the  name-,  of  workmen  obnoxious  to  a  certain  class  of  employers, 
because  of  activity  in  strike  leadership  <>r  some  similar  action.  Men  on  the 
blacklist  find  it  almost   impossible  to  gel  employment  anywhere,  tor  the  list   is 

circulated  widely,  and  once  having  been  blacklisted  a  workman's  reputation 
follows  him  .all   over  the  countrv. 

Underlying  causes  of  strikes,  according  to  tabulated  statistics,  run  largely 

to  WagCS,   hours  of  labor,    recognition   of   the   trade   union   bv   capital    to   the  OXclll- 

369 


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WEAPONS   OF   THE   LMiOli    TRUST. 


371 


sion  of  non-union  labor,  good  sanitation,  etc.  Indeed,  the  history  of  legislation 
in  favor  of  better  conditions  for  the  working  class  has  been  followed  somewhat 
closely  by  strikes  and  boycotts  based  on  demands  for  such  reform.  Gem  rally 
speaking,  the  demand  for  higher  wages  comes  when  there  is  prosperity,  and  the 
resistance  to  decreased  wages  comes  with  times  of  depression. 

In  the  nature  of  labor  organization  the  union  tries  to  monopolize  the  forces 
at  hand,  and  hence  may  be  said  primarily  to  be  selfishly  inclined.  We  find, 
therefore,   that,   since  the   whole  capitalist    class    is   allied   against    the   encroach- 


TAILOR    SHOP. 

in    Hi.-   making    <-i    fine   garments   male   labor   Is   employed   aln  lj     and   the 

part  ol    tin-   work   is  done   by   hand. 

in' nt  <>f  the  laboring  class,  the  Btrikc  and  boycott  are  used  even  I'm-  the  forcing 
of  demands  greatly    removed   from  original  causes.     Thus  there  i»  the  sympn 

Untie   strike,    by    which    unions  allied    will:   eacli    other  <|uil    work    in    order    to   sup 

l'oi-i  one  of  their  members,  after  tin  fashion  of  an  offensive  and  defensive 
alliance  between  greal  nations.  While  many  evils  have  been  laid  at  the  door  of 
tin'  trade  union  because  of  riots  and  disorder  which  have  attended  ■strikes,  it. 
-"in-  that  as  organization  becomes  better  defined  and  leaders  of  unions  work 
along  more  definite  lines  to  obtain  definite  ends  tin-  strike  becomes  more  sue- 


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WEAPONS   OF   THE   LAliOR    TRUST.  378 

cessful  as  a  weapon.  In  order  to  attain  success  the  strikers  almost  invariably 
depend  upon  public  sympathy.  The  better  organized  and  better  led  associations 
of  laborers  recognize  this  principle  and  they  realize  that  the  violence  attendant 
upon  strikes  almost  always  is  blamed  upon  the  strikers,  whether  it  comes  from 
a  semi-criminal  floating  population  or  from  the  unions  themselves.  The  public 
for  a  time  will  put  up  with  inconveniences  caused  by  cessation  of  industry  if 
some  great  principle  is  at  stake,  but  when  violence  or  great  waste  of  wealth 
results  in  widespread  suffering,  public  opinion  often  steps  in  to  put  a  stop  to 
the  strike. 

Under  circumstances  which  may  lead  to  such  public  intervention  the  labor 
leader  is  coining  to  understand  more  and  more  that  tact  and  preparation  to 
carry  out  labor's  side  of  existing  agreements  must  be  rules  of  conduct  in  strife 
for  such  rights  as  labor  demands  shall  be  recognized.  Therefore  majority  rule 
generally  obtains  in  the  ordering  of  a  strike.  It  is  asserted  often  by  anti-labor 
interests  that  workmen  are  forced  to  quit  work  when  they  do  not  wish  to.  This 
not  infrequently  is  the  case.  But  labor's  explanation  is  something  after  this 
wi>i ■:  all  labor  benefits  by  the  granted  demands  of  collective  labor,  hence  all 
workmen  should  band  together  in  the  demand  for  such  things  as  the  majority 
shall  deem  wise.  To  put  the  matter  in  political  terms,  the  laborer  who  is  forced 
to  go  out  on  a  strike  against  his  immediate  desires  is  in  the  same  position  as 
the  citizen  who,  being  of  one  political  faith,  is  forced  by  the  majority  rule  to 
live  under  the  administration  of  a  party  of  the  opposite  faith. 

Naturally   being  of   nearly   a   single   type  or  class,   the   w  orkingtneii   manifest 
a  great    loyalty   to  each  other  and   to   their  cause.      They  believe   it    would   be   for 
their  interests  to  be  banded  closely  together  in  order  to  enforce  what    th.\    con 
sider  their  rights,  just  as  capital  has  used  the  great   forces  of  combination  to 

bring  about   the  trust.      Each  side  is  lighting  for  the  biggesl   share  of  the  wealth 
of  the   world    it    can   get.       In    partisanship   the   trade   unionist    goes   to   the   extent 

of  supporting  men  out   on  strike  from  a  general   fund  made  up  by  assessing 
union   members  at    work.     This   partisanship  goes  even   farther:  it    practically 

Ostracises   the   man    who   takes   |  he   place   of   the   striker.      This   man.  known    gen 

erally  by  the  opprobrious  epithel   ••scab,"  in  the  eyes  of  the  unionist   is  frus 
t  rating  the  best  interests  of  labor  as  a  class.     The  "scab"  is  often,  not  always, 

lower  down   in   the  human   scale  than   the  union   man:   hence,  argues  the  unionist, 

he    should    work    for    his   own    uplifting    in    harmony    With    the    union    man.      The 

lb,"    according    to    the    union    man,    trails    along    on    tin     skirts    of    unionism, 

eraining  what  the  union  gains  in  prosperity  and  success,  contributing  nothing  to 
the  genera]  advancement   of  the  working  class  of  which  he  is  a   member  and 


WEAPONS   OF    THE   LAHOH    TRUST. 


375 


never  sacrificing  himself  when  a  great  crisis  demands  his  aid.  "The  scab/'  says 
the  trade  unionist,  "is  like  unto  the  man  who  will  not  go  to  war  when  his 
country  calls,  yet  who  reaps  the  benefits  bought  by  the  blood  of  his  fellows." 
This  conception  of  the  loyalty  and  partisanship  to  the  organized  labor  move- 
ment is  necessary  to  the  understanding  of  some  of  the  great  underlying  causes 
which  result  in  violence  during  strikes. 

America  has  seen  some  greal   historic  strikes.    In  1S77  one  developed  on  the 
Baltimore  and  Ohio.  Pennsylvania  and  other  railroads  which   resulted   in  great 


A     CABLE    ENGINE. 


I 
mo 


Mar.  leal    Ingenuity  has  always   been   devoted    t>>  the  search    i">    lm] 

n   the   application   of    mechanical    power.      We   show    cables  passing   "\  which 

move  ;in«i    Btretch   them.      In   the   meal    packing    Industry,   the  ca 
rled   on   thesi    endless  cables,   passing   in   turn   skilled    laborers   who   perform   ■  <   certain  duty. 

damage  In  property  and  which  necessitated  the  calling  mil  of  the  troops.  In 
1892  Hi"'  Homestead  strike  at  the  Carnegie  Steel  Works  was  perhaps  as  blood) 
a  conflict  as  has  been  recorded.  In  this  strike  an  actual  battle  took  place 
between  Pinkerton  detectives  lor  the  employers  and  armed  unionist-.  The 
Chicago  sirik<  <>f  [894,  which  grew  out  of  an  efforl  of  flu  American  Railwa) 
I  iii*»ii.  under  the  leadership  of  Eugene  V.  Debs,  to  boycott  Pullman  cars  to  aid 
the  strikers  at  the  Pullman  car  works,  caused  loss  of  lid.  tin  burning  of  cars 
and  the  calling  of  the  national  troops  to  quell  disorder.     The  great  anthracite 


S76  WEAPONS   OF   THE   LABOR   TRUST. 

coal  strikes  o(  1900  and  L902,  the  latter  the  one  which  was  settled  by  the  deter- 
mined intervention  of  President  Roosevelt,  caused  great  loss  of  property  and 
misery  in  many  places  because  of  the  scarcity  <>!'  coal  during  cold  weather.  In 
the  recent  miners'  strike  in  Colorado,  which  was  in  charge  of  the  Western 
Federation  of  Miners,  the  struggle  was  marked  by  the  most  serious  kind  of 
rioting,  dynamiting,  and  civil  war  which  martial  law  quelled  only  after  whole- 
sale arrests,  imprisonments  and  trials,  burning  and  confiscation  of  Laborers' 
property  and  deportation  of  unionists  from  the  state.  In  1905  Chicago  was 
the  scene  of  a  troublous  strike,  one  of  a  series  of  difficulties  in  which  teamsters 
fought  in  a  systematic  strike  against  what  they  said  was  ,-i  systematic  effort  on 
the  part  of  tlu  employers  to  put  an  end  to  all  trade  union  principles.  Here 
riots  and  killings  occurred  with  great  frequency. 


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CHAPTER   XXXIII 

THE   CRIMES   OF  LABOR— STRIKE   VIOLENCE   AND   ITS   CAUSE. 

The  Rights  of  the  Individual — Union  and  Non-Union  Laborers — The  Suffer- 
ing Publie  Between  Two  Fires — The  "Picket"  and  the  "Scab" — Epochs  in 
the  Long  War — "Bleeding  Colorado" — The  "drafting"  Labor  Boss — 
Bribe  and  Blackmail — Who  Is  Responsible  for  the  Disorders  that  Accom- 
pany Strikes? 

"While  the  right  to  enter  upon  a  strike  is  and  must  be  conceded  as  a  right 
belonging  to  the  personal  freedom  of  the  working  men,  this  much  must  ever  he 
demanded,  and  in  the  name  of  the  same  principle  of  freedom  under  which  the 
men  act  who  refuse  to  work:  that  they  should  cease  to  work  must  in  no  way 
interfere  with  the  liberty  of  others  who  may  wish  to  work.  The  personal 
freedom  of  the  individual  citizen  is  the  most  sacred  and  precious  inheritance  of 
America.  The  constitution  and  the  laws  authorize  it.  The  spirit  of  the  coun- 
try proclaims  it.  the  prosperity  of  the  people,  the  very  life  of  the  nation. 
require  it." — Archbishop  Ireland. 

While  the  trade  unionist  sees  advantages  to  be  gained  in  organization  and 
finds  the  necessity  of  combatting  the  greed  of  organized  capital  by  means  of 
the  strike  and  the  boycott,  public  opinion,  which  is  the  final  arbiter  in  all  strife, 
runs  \<Tv  close  to  the  dictum  of  Archbishop  Ireland  as  sel  forth  above.  The 
tact  that  a  long  protracted  strike  i-*  almost  never  unaccompanied  by  riot, 
murder,  arson  or  other  examples  of  lawlessness,  has  called  up  great  condemns 
lion  of  labor  methods.  The  scenes  in  the  contest  between  the  mine  owner--  and 
iIh-  Western  Federation  of  Miners  which  brought  lor  thai  proud  western  state 
the  humiliating  title  of  "Bleeding  Colorado."  and  the  almost  endless  procession 
(  f  disorders  following  in  the  wake  of  strikes  in  Chicago,  have  called  for  reme 

dies. 

Doubtless  not  all  the  crimes  charged  to  labor  are  due  dircctlj  to  labor. 
There  are  many  vicious  characters  thai  hang  upon  the  skirts  of  well  meaning 
unionists  who  are  ever  prone  to  throw  the  firsl  stone  which  rouses  mob  spirit. 
T'  i  mob  spiril  does  not  exisl  Bimply  in  the  matter  of  labor  strife,  lor  il  is 
.in  in  the  outbursts  of  lawlessness  when  some  depraved  wretch  i^  lynched  for  a 
n:i\  or  ;i  fancied  crime.  The  writer  personally  has  witnessed  labor  riots  in 
Chicago  where  the  trouble  was  Btarted  by  Btreel  urchins  who  wen    imbued  with 

379 


380  THE  CRIMES  OF  LABOR. 

the  mob  spirit  to  a  certain  degree  and  who  vented  it   because  of  their  intense 
hatred  of  the  "scab"  or  ••unfair"  workman  and  because  of  their  partisanship 

tor  thi'  union. 

It  [s  not  this  phase  of  disturbance,  however,  which  has  exercised  the  think- 
ing public  to  protest  most  emphatically  against  labor  disturbances.  The  suffer- 
ing public,  which  in  these  days  of  extensive  industrial  organization  feels  the 
brunt  o\'  a  great  coal,  railway  or  packing-house  strike,  insists  upon  one  thing, 
that  street  brawls,  shooting  and  arson  shall  not  he  accompaniments  of  a  strike 
which  can  be  laid  to  the  door  of  the  labor  organization  running  the  strike.  In 
almost  every  case  this  disorder  and  bloodshed  is  caused  by  the  fact  that  a  non- 
union man  or  "scab"  has  rilled  the  place  of  the  union  striker.  At  once  the 
striker  endeavors  by  several  means  to  prevent  this  usurpation  of  his  position, 
for  unless  the  industry  against  which  the  strike  is  called  can  be  prevented  from 
continuing  its  business,  the  strike  will  fail. 

The  methods  of  prevention  are  many  and  devious.  The  most  common  is 
that  of  "picketing."  The  union  engaged  in  the  strike  appoints  a  number  of 
spies  or  "pickets"  whose  duty  it  is  to  intercept  the  working  non-union  men  or 
••scabs."  and  dissuade  them  from  continuing  work.  Sometimes  this  is  done  by 
gentle  means,  but  nearly  always  it  is  accompanied  by  threats  of  personal 
violence.  This  crusade  against  the  scab  extends  to  the  non-union  man's  wife, 
children  and  other  relatives.  It  is  difficult  always  to  prove  that  assault  or  mur- 
der of  a  non-union  man  is  the  direct  work  of  pickets,  but  the  court  records  are 
filled  with  enough  instances  where  men  have  been  found  guilty  of  such  action 
to  place  great  blame  upon  the  unions.  This  statement,  perhaps,  should  be 
qualified  by  saving  that  the  blame  is  placed  more  directly  upon  union  leaders 
than  upon  the  members  of  the  unions  collectively.  This  may  be  explained  by 
developments  that  occurred  at  the  time  this  was  written.  In  Chicago  a  great 
strike  was  in  progress.  The  union  controlling  the  strike  voted  money  for 
"educational  purposes."  The  members  turned  the  money  over  to  the  executive 
committee,  believing  it  was  to  be  used  for  peaceful  persuasion  of  non-union  men 
not  to  work  in  the  places  of  the  strikers.  A  man  was  killed  because  he 
ibbed."  Men  were  arrested  and.  according  to  their  confessions,  they  had 
been   hired  to  slug  non-union  men   into  submission. 

"Bleedmg  ( 'olorado." 

So  great  were  the  disturbances  in  Colorado  in  the  ten  years  from  1894  to 
L904  that  extracts  are  given  hen-  from  a  pamphlet  issued  by  the  Colorado  Coal 
Mine  Operators'  Association  which  set   forth  some  of  the  charges  made  against 


THE  CHIMES  OF  LABOR.  381 

the  leading  spirits  in  the  Western  Federation  of  Miners  which  called  the  great 
and  bloody  strikes  from  Coeur  D'Alene  to  Cripple  Creek: 

"Neither  the  people  of  Colorado  nor  their  Governor,  James  H.  Peabody, 
hold  organized  labor  responsible  for  the  terrible  crimes  of  the  Western  Federa- 
tion of  Miners.  Neither  do  they  contend  that  all  members  of  this  organization 
belong  to  the  vicious  or  lawless  class.  It  would  be  just  as  unreasonable  to  con- 
demn the  institution  known  as  'organized  labor'  for  these  crimes  as  it  would  be 
to  condemn  the  republican  form  of  government  because  of  the  crimes  of  the 
barbarous  little  republics  of  Central  and  South  America.  It  was  not  a  question 
of  whether  corporations,  mine  owners,  alliances  or  unions  should  prevail,  it  was 
a  question  of  whether  or  not  law  and  security  for  life  and  property  should 
prevail. 

•'The  people  of  Colorado  believe  that  the  long  record  of  outrage  and  crime 
given  in  this  pamphlet  justifies  the  following  conclusions 

"1.  That  a  large  number  of  criminals  and  lawless  men  have  been  welcomed, 
supported  and  sheltered  by  the  Western  Federation  of  Miners. 

"£.      That  the  officers  of  that  organization  and  a  large  number  of  the  mem 
bers,    while    perhaps    not    committing    crimes    themselves    for    which    they    can    be 
prosecuted,  do  directly  and   indirectly  advise  or  encourage  the  lawless  among 
them   to  commit    crimes. 

"3.  That  these  officers  and  this  element  preach  disrespect  for  the  law  and 
contempt  for  the  lawful  authorities  and  openly  and  publicly,  as  individuals, 
approve  of  and  gloat  over  the  slugging,  dynamiting  and  murdering  of  non- 
union men  by  their  criminal  associates. 

••  p  Thai  where  this  organization  has  bad  its  members  in  local  public 
offices,  or  where  it   has  had  the  power  to  influence  peace  officers  and  courts  in 

this   State,   it    has   paralyzed   the  hand   of  justice  and    mad.'   it    n<  \t    to   impossible 

to  convict  members  of  tin    Federation  caught  in  the  act  of  committing  crimes. 

•■;,.     Thai    this  organization,   having   formall}    and   officially   espoused   the 
cause  of  the  bo  called  Socialist  party,  is  opposed  to  our  prcscni  form  of  govern 
meni  and  is  aiming  at  iu  overthrow,  together  with  the  abrogation  of  the  pres<  ni 
Constitution. 

••(i.  Thai  this  organization  teaches  its  members  to  regard  Hie  wealth  they 
produce  from  the  property  .,t'  others  a-  their  own,  thus  encouraging  thefi  (oi 
ore,  for  instance)  and  also  inflaming  the  minds  of  its  members  against  their 
employers,  againsi  law,  against  organized  society  and  against  the  peace  and 
-. 1 1 <  t \   of  tin    public." 


Tin:  CRIMES  OF  LABOR. 

The  Grafting  Labor  Boss. 

The  vicious  practices  of  certain  elements  of  organized  labor  would  not  be 
recorded  completely  were  not  the  sins  of  the  labor  boss  recounted  in  some 
measure.  Competent  judges  say  the  life  of  the  trade  union  now  depends  upon 
securinc  honesl  and  intelligent  leaders,  who  on  the  one  band  will  not  use  such 
influence  or  desire  for  vain  glory  through  ignorance  as  they  can  induce  their 
followers  to  grant  them  power  to  lower  rather  than  raise  the  condition  of  the 
members  of  the  unions,  by  illogical  and  arbitrary  methods  and  demands,  and 
on  the  other  hand  will  not  sell  out  the  interests  of  the  union  to  the  ever-ready 
capitalist  with  his  bribing  money  bags.  The  latter  condition  is  one  which 
threatens  only  too  seriously  to  undermine  society  today.  The  bribery  of  labor 
leaders  cannot  continue  indefinitely,  for  its  sanction  by  the  union  is  of  course 
impractical,  and  once  the  members  of  the  union  discover  the  practice  the  boss  is 
dethroned  as  a  general  thing.  But  that  this  practice  is  growing  to  some  degree 
is  certain.  The  writer  knows  of  one  case  personally  where  three  trusted  leaders 
of  a  union  wire  in  the  pay  of  an  employer  who  bribed  them  to  disclose  the  busi- 
ness methods  of  the  union. 

Of  this  condition  of  affairs  District  Attorney  Jerome  of  New  York  has  said: 
"This  corruption  in  the  labor  unions  is  simply  a  reflection  of  what  we  find  in 
public  life.  Every  one  who  has  studied  our  public  life  is  appalled  by  the  cor- 
ruption that  confronts  him  on  every  side.  It  goes  through  every  department  of 
the  national,  state  and  local  government.  And  this  corruption  in  public  life  is 
a  mere  reflection  of  the  sordidness  of  private  life.  Look  what  we  find  on  every 
gjde  0f  us— men  whacking  up  with  their  butchers  and  grocers,  employers  carry- 
ing influential  labor  leaders  on  their  payrolls,  manufacturers  bribing  the  super- 
intendent- of  establishments  to  buy  their  goods." 

To  mention  a  specific  instance  of  labor  bossism  and  corruption  at  the  foun- 
tain of  trade  unionism  let  us  quote  the  words  of  Hay  Stannard  Baker  concern- 
ing the  rule  of  Sam  Parks,  the  late  walking  delegate  or  business  agent  of  a 
New  York  building  union. 

"This  man.'*  says  Mr.  Baker,  "elected  to  carry  out  the  instructions  of  his 
union,  actually  reversed  the  process  and  bossed  the  union.  His  four  thousand 
iron-workers  obeyed  like  children.  He  called  strikes  when  and  where  he  pleased, 
often  deigning  to  give  the  men  no  reason  why  they  were  called  out;  he  spent 
the  money  of  the  union  lavishly  and  made  no  accounting.  Once,  when  an  over- 
bold member  ventured  to  inquire  in  open  meeting  what  had  become  of  a  certain 
sum  of  money.   Park-  replied  by  hurling  a  table  at  him.     Several  others  who 


THE  CHIMES  OF  LABOR.  383 

opposed  him  were  'beaten  up'  in  near-by  saloons.  Others  mysteriously  lost  their 
jobs.  When  a  man  disagreed  with  him,  he  "gave  him  a  belt  on  the  jaw,"  as  he 
has  said,  'and  that  cleared  his  mind.'  Of  $60,000  received  in  fees  and  dues  by 
the  union  in  1901,  over  $40,000  disappeared  without  detailed  accounting. 
mostly  under  Parks's  direction.  Of  $75,000  received  in  1902,  some  $60,000 
was  speni  practically  without  accounting.  What  these  gnat  sums  went  for 
(strikes,  Parks  said,  vaguely),  no  one  but  Parks  really  knew,  and  he  wouldn't 
tell.  Every  member  of  the  union  knew  the  exact  character  of  Parks,  that  he 
was  a  'grafter' — and  yet  he  could  not  be  displaced.  Even  after  being  arrested 
for  blackmail,  he  was  re-elected  by  his  union;  when  he  went  to  State's  Prison 
hi-  salary  as  walking  delegate  was  continued,  and  when  hi'  was  released  under 
court  orders  he  marched  al  the  head  of  the  Labor  Day  parade,  cheered  by  his 
followers. 

"But  the  money  he  received  from  the  union  treasury  probably  did  not  equal 
the  amount  he  got  from  the  employers.  Behold  the  extraordinary  spectacle  of 
builders  and  manufacturers  of  large  interests  summoned  by  this  former  coal- 
heaver  to  come  to  hi-  house  or  to  the  saloon  of  his  appointment  and  pay  him 
two  hundred  or  nine  hundred  or  two  thousand  dollars  for  his  personal  use  to 
-ciin  permission  to  go  on  with  their  business!  This  happened  not  once,  but 
many  times,  as  the  evidence  presented  to  District  Attorney  Jerome  has  abund- 
antly shown.  And  if  a  builder  was  recalcitrant  his  job-  were  'struck'  and  the 
linn  kept   out  until  he  'settled.' 

"'I  am  not  entering  here  into  the  question  of  the  justice  of  these  strikes; 
Borne  of  them  may  have  been  warranted ;  I  suspect  they  were;  but  the  point  is 
that  Sam  Park-  and  other  men  of  his  type  called  them  without  consulting  any- 
thing but  their  own  personal  pleasure,  with  no  instructions  from  their  unions, 
often   without   giving  any   reasons  to  the  men  who  were  thus  compelled  to  lie 

idle  and.  worse  -till,  strikes  wen  often  accompanied  h\  the  demand  for  money 
or  to  enforce  th,  payment  of  money.  Did  the  money  go  t<>  the  men  who  -truck 
and   lo-t    their  Wages?      \ol   a   bit   of  it;  they   won  the  battle.   Park-   pocketed   the 

spoil-,  though  sometimes  he  -pent    it    liberally  'setting  up'   for  hi-   friends  at 

near  by  bars.      I   heard  a   hoUSCSmith  Say:    'Sam   Park-  i-  good  hearted  all   right ; 

if  he  takes  graft  he  spends  it  with  tin-  boi 


Copyright,   1900,   by   Detroit   Photographic   Co. 

SCENE    IN   A    POOR   QUARTER,   NEW   YORK  CITY,    ON    A    MARKET    DAY. 

nee  are  common  in  a  metropolis  even  on  the  most  ordinary  shopping  days. 
The  immigrants  who  come  to  America  generally  choose  to  settle  in  communities i  In cities. 
This  vi^-w  is  remarkable  for  Ite  fidelity  in  depicting  an  ordinary  day  in  such  a  <££££: 
Note  how  the  streets  are  filled  with  vehicles  of  all  descriptions  In  this  small  district 
there  live  as  manv  people  as  would  be  the  population  of  a  small-sized  city.  Che  necessi 
ties   of  life  ar<-   brought   to  their  very  doors    for   sale   or  barter. 


CHAPTER    XXXIV 

CAPITAL'S  ANSWER  TO  LABOR— NO  "SQUARE  DEAL"  FOR  THE 

PUBLIC, 

Hou-  Employers'  Organizations  Have  Multiplied — Radicals  and  Conservatives 
//</«•  as  Well  as  Among  Labor  Unions— The  Lockout,  the  Blacklist  and 
the  Injunction  Answer  the  Strike  and  the  Boycott. 

At  last  organized  capita]  has  challenged  organized  labor.  We  have  seen  in 
earlier  pages  some  of  the  abuses  of  corporate  power.  Also  we  have  seen  some 
of  the  excesses  laid  at  the  doors  of  organized  labor,  such  as  rioting,  murder, 
graft  of  labor  leaders,  etc.  When  "Bleeding  Colorado"  fought  out  its  fight  for 
peace  at  any  cost,  the  employing  class  formed  what  was  called  a  Citizens' 
Alliance.  When  Chicago  business  men  were  ready  to  tight  union  dominations, 
the  Chicago  Employers'  Association  was  formed.  Almost  spontaneously  these 
and  many  other  organizations  of  employers  got  together  in  Chicago  in  1t)!>:> 
and  formed  the  Citizens'  Industrial  Association  of  America.  Several  influences 
worked  to  bring  about  this  association,  but  principal  among  them  were  the 
sudden  recognition  and  fear  of  the  expanding  power  of  unionism  even  when 
used  by  sane  leaders,  and  the  fear  of  the  power  of  unionism  when  led  by 
ignorant   or   vicious   bosses. 

The  writer  was  present  at  the  convention  of  the  professional  organizers  ot 
these  business  nun's  associations  which  banded  into  I  he  Citizens'  Association  and 
the  impression  gained  after  hearing  impassioned  speeches  by  such  men  as  David 
M.  Parry  of  Indianapolis,  dames  C.  Craig  of  Denver,  Frederick  W.  dob  of 
Chicago,  and  others,  is  that,  while  these  men  profess  no  desire  to  down  "honest 
and  „  risible  unions,"  practically  the  effect,  if  not  the  desire,  is  to  combal  all 
unionism  of  labor  by  unionism  of  capital.  In  other  words,  it  is  a  struggle  for 
supremacy.  Some  of  the  first  fruits  of  active  efforts  to  wipe  out  trade  unionism 
as  such  were  grown  in  the  methods  employed  by  the  Chicago  Employers'  Asso 
ciation  in  the  teamsters'  strike  of  1905  in  Chicago,  where  the  practical  motto 

of  th.    employers  was,  "We  believe  in  unionism,  bul  damn  the  un ."     "G I 

unions*'  are  welcomed,  but    invariably   this  means  "mi  union." 

In  considering  such  a  question  it   is  nol   within  the  province  of  the  writer 
t()    justify    the   bad   actions  of  either   part}    to  such   controversies  as  are  seen 


,s,i  ,    IPITAVS  ANSWER  TO  LABOR. 

daily  iu  the  history  of  American  industry.  The  stand  taken  here  is  for  the 
"square  deal"  for  ever}  man.  II  lias  been  shown  previously  what  grave  charges 
have  been  laid  al  the  door  of  the  union.  bu1  lei  us  look  al  some  of  the  methods 
of  the  now  actively  organized  employers  in  not  arbitrating  the  questions  a1 
issue,  bui  in  fighting.  In  the  first  place  these  employers'  associations  use  the 
boycott—  the  weapon  which  they  cry  down  as  un-American — as  shown  in  the 
attempt  to  discipline  papers  in  Colorado  which  dared  side  with  the  opposition. 
Here  is  a  resolution  passed  by  the  Citizens'  Alliance  of  Denver,  October  18, 
190S: 

"Resolved,  that  we,  as  a  body,  urge  upon  the  Denver  Advertisers'  Associa- 
tion the  importance  of*  co  operating  with  us  in  this  effort,  and  request  such 
association  to  so  place  its  advertising  matter  as  to  assist  in  upbuilding  instead 
of  tearing  down  business  interests,  to  the  end  that  a  .just  and  conservative 
policy  may  be  adopted  and  advocated  by  the  daily  press." 

Incidentally  it  may  be  said  the  right  of  freedom  of  the  press  was  infringed 
upon  in  the  Colorado  strikes  by  capitalists  destroying  union  newspaper  plants. 

In  the  next  place  these  employers  make  just  as  vigorous  use  of  the  sympa- 
thetic- lockout  as  do  the  unions  of  the  sympathetic  strike.  Frequently  where 
labor  difficulties  arise  the  organized  employers  take  every  measure  to  affront  the 
union  still  further,  bent  upon  the  annihilation  of  the  union  rather  than  the 
granting  of  the  slightest  concession.  Presumably  this  is  based  upon  the  fear 
that  if  any  concession  is  granted  more  will  he  demanded  by  the  union  the  next 
time.  And  vet  the  employing  class  with  its  greater  intelligence  and  advantages 
is  better  equipped  to  he  charitably  inclined  than  the  plodding,  working  class. 

Organized  employers  indirectly  have  access  to  slugging  methods  which  are 
just  as  reprehensible  as  those  of  the  bad  labor  unions.  For  instance,  in  the 
Chicago  teamsters'  strike  in  Chicago  in  1905,  the  employers  in  their  demand 
not  for  the  "square  deal"  for  the  general  public  hut  for  the  active  operation 
of  their  business  during  strike  when  the  union  leaders  were  asking  arbitration 
(whether  right  or  wrong  is  not  the  question)  brought  into  Chicago  hundreds 
of  vicious  South,  rn  negroes  of  the  criminal  class,  armed  them  with  rifles  and 
revolvers  and  instructed  them  to  shoot  at  the  first  suggestion  of  interference  of 
their  work  as  teamsters.  The  direct  and  infallible  result  was  murder.  It  is 
true  the  employers  in  this  struggle  set  forth  at  length  that  they  insisted  upon 
the  "right  to  run  private  business"  as  they  should  dictate.  But  here  is  the 
indictment  made  by  pne  of  the  greatest  employing  interests  in  Chicago  who 
endeavored  to  keep  out  of  the  fight: 

"Chicago  will  see  disturbances  just  so  long  as  both  sides  to  these  disputes 


CAPITAL'S  ANSWER  TO  LABOR. 


387 


arc  stiff-necked  and  stubborn.  The  employers  as  organized  arc  not  a  whit  less 
responsible  than  the  unions,  excessive  as  are  the  demands  of  some  of  the  labor 
leaders.  It  is  my  firm  conviction  that  the  employers  are  organized  to  fight,  not 
perhaps  just  for  the  sake  of  fighting,  but  at  least  to  be  supreme  over  the  trade 
unions." 

And  if  we  wish  to  uncover  dastardly  deception  let  us  turn  to  the  following 
copy  of  a  circular  distributed  in  the  South  to  induce  ignorant  men  to  come  to 
Chicago  to  risk  their  lives  in  "breakine"  a  strike: 


"To  all  colored  workmen:  He  free!  Your  freedom  is  ham 
pered  in  southern  cities.  Chicago  is  a  haven  of  freedom  and 
prosperity.  Big  wages  and  short  hours  prevail.  Labor  is  scarce 
and  the  negro  is  welcome.  Colored  teamsters  are  employed 
exclusively  by  the  large  employers  of  labor,  and  an  unlimited 
number  of  .jobs  are  waiting  for  strong  colored  men  in  that  city. 
Our  race  is  shooting  down  white  strikers  under  police  protection, 
and  at  last  freedom  for  our  race  is  assured,  and  the  colored 
laborer  will  assume  a  responsible  place  in  society  in  that  northern 
city,  upon  equal  terms  with  the  whites. 

"The  employers  have  decided  to  uphold  our  people  by  the  use 
of  the  shotgun  if  necessary.  Be  free  men!  Come  to  Chicago, 
one  and  all.  Come  quick.  Homes  and  the  necessities  of  life 
await  you  upon  your  arrival.  Agencies  are  established  in  all 
parts  of  the  city  to  protect  and  care  for  you.     Start   at   once.*" 


This  action  was  denounced  by  the  Colored  Men's  Business  League  of  Illinois. 
Another  weapon  of  the  employing  class  is  the  injunction   from  the  courts 

which   prohibits   interference  of   pickets  or  others   in   the  affairs  of  lb.'  employers 

or  with  nun  union  nun  .it  work.  While  unquestionably  this  has  hern  necessary 
in  many  instances,  -till  the  effed  upon  the  union  man  is  as  a  va\  rag  before  a 
bull. 

The  principal  strife  just  now  between  the  employers'  associations  as  a  whole 

anil  the  trade  unions  is  on  the  matter  of  the  "open  shop."  This  term  is  used 
to    indicate  an   establishment    where   either   union   or   lion  union    nun    ma\    be   em 

ployed  without  discrimination.  The  opposing  term,  the  "closed  shop,"  indi 
catea  an  establishment  when-  none  hut  union  help  is  employed.  As  has  been 
suggested  previously,  one  of  the  fundamentals  of  unionism  is  to  establish  as 
1 1<  ,-i  rl  \  .-i  perfect  monopoly  in  labor  as  possible.  111  order  the  better  t<>  meet 
capitalistic  monopoly.  For  this  reason  principal^  the  union  seeks  to  combat 
the  principle  of  the  "open  shop."     The  unionist   maintains  that    the  workman 


.ss 


(  .//'//  II rs  ANSWER  r<>  i ..num. 


is  tin-  better  judge  of  the  conditions  in  winch  he  should  work  and  for  that 
reason  also  dour-  to  restrict  the  number  of  apprentices  each  journeyman 
worker  shall  have  as  assistants.  These  and  kindred  principles  the  employer 
resists  on  the  pica  that   his  business  is  his  own. 

While  it  appears  that  those  employers'  associations  mentioned  thus  far  work 


EXCAVATING   A    CHICAGO    TUNNEL,    FORTY   PEET    BELOW    THE    STREETS. 

The  difficulty    of   the   engineering  feat   of  building  these  tunnels   can  be   imagined   when 

it  Is   known    that   the   business   portion   of  t lie   city   rests  upon  what  was  once   and   still    is   to 

erable  depth  muck  or  soft   clay,     Chicago  is  the  first  city  in  the   world  to  make  the 

departure   of   establishing   a    system    of   subways    under   the    streets   for   the   handling  of  its 

t    traffic.      Other    cities    have    built    subways    for    passenger   traffic    in    order    to   relieve 

stion  of  the  streets.      But   by   the  Chicago  system  the  passenger  traffic  will   still  he 

in  tb<  dut  will  not  be  hampered  by  the  thousands  of  teams  and  heavy  trucks  which 

.mpede   car  traffic. 

to  an  end  which  seemingly  always  antagonizes  labor,  there  are  associations 
which  make  it  a  business  to  meet  organized  labor  half  way,  which  take  the  stand 
that  neither  side  can  always  be  in  the  right  and  that  contracts  and  agreements 
an-  saving  of  much  worry  and  considerable  bloodshed.  What  the  end  of  the 
conflict  between  those  who  do  not  work  on  the  "square  deal"  plan  will  be  can- 
not be  conjectured.  This  Bummary  of  the  situation,  however,  as  made  by  Ray 
Stannard  Baker  recently,  is  impartial  and  worthy  of  consideration: 


CAPITAL'S  ANSWER  TO  LABOR.  3S9 

"1.     Both  sicks  have  an  equal  right  to  organize. 

"2.  Employers'  associations  cannot  refuse  to  the  unions  the  same  rights 
and  the  same  methods  of  righting  which  they  themselves  exercise,  and  vice 
versa.  If  one  side  boycotts  and  'slugs'  and  uses  injunctions,  the  other  side  will 
use  the  same  weapons.  If  one  side  DEALS  FAIR  it  will  get  fair  dealing  from 
the  other  side  sooner  or  later. 

"3.  Absolutely  stable  and  continuing  conditions  are  not  possible  in  indus- 
try any  more  than  in  any  other  department  of  life;  both  sides  must  lie  pre- 
pared  for  constant   readjustment   and    for  the  attendant    concessions. 

"4.  The  condition  at  present  most  favorable  to  industry  would  seem  to  be 
one  of  -trong.  well-disciplined,  reasonable  organization  on  both  sides.  A  great 
disparity  of  strength  always  means  the  abuse  of  power  by  the  more  vigorous 
organization. 

"5.  Organization  always  presumes  a  fighting  force,  as  each  nation  has  its 
standing  army,  but  the  prime  object  should  be  peace. 

"(J.  The  same  qualities  of  fair-dealing,  honesty  and  personal  contact  re- 
quired in  business  generally  are  equally  necessary  in  buying  ami  selling  labor — 
a  transaction  which  is.  after  all,  neither  sentiment,  nor  warfare,  nor  speechify- 
ing, but  business." 


CHAPTER    XXXV 

SOCIALISM. 

>  Theory  of  the  Industrial  Millennium  and  the  Tendencies  in  tJiat  Direction  as 
Hastened  by  the  Abuse  of  Monopoly  in  both  Capital  and  Labor  Classes — 
Tin  Municipal  Ownership  Movement  an  Evidence  of  the  Growth  of  Socialist 
Principles. 

During  the  Investigation  into  the  railway  rate  evils  which  aroused  Presidenl 
RooseveH  to  insist  upon  government  regulation  of  the  greatest  of  industries  the 
President  was  quoted  as  having  said  to  several  railway  presidents  that  unless 
concessions  were  made  to  the  people  at  large,  unless  something  nearer  to  a 
"square  deal"  could  be  granted  than  the  public  had  experienced  before,  the 
country  was  destined  to  see  social  democracy.  About  the  same  time  Vice- 
President  Frank  A.  Vanderlip  of  the  National  City  Bank  stated  that  the  growth 
•  if  socialism  in  Europe  threatened  to  gain  great  force  in  America;  that  there 
were  visible  prospects  of  a  definite  alignment  of  political  forces  with  this  issue 
a-*  the  dividing  line.  Shortly  before  this  nearly  500,000  votes  were  cast  for 
E.  V.  Debs,  the  candidate  for  President  on  the  Socialist  ticket  and  the  man 
who  had  led  the  American  Railway  Union  in  the  great  Chicago  strike  of  1894. 
So  definite  has  the  tendency  been  toward  increased  agitation  for  Socialism  in 
recent  times  that  the  capitalists  have  raised  a  great  cry  against  what  they 
believe  to  be  its  dangers,  principal  of  which  is  said  to  the  encroachment  on  the 
individual  rights  of  man.  The  press  has  teemed  with  expostulations  against 
the  possible  overthrow  of  the  prevailing  systems  of  industry. 

Just  as  emphatic  statements  have  conic  from  the  direct  representatives  of 
the  capitalists  who  definitely  leagued  themselves  together  to  crush  out  trade 
unionism.  Here  is  what  D.  M.  Parry,  ex-president  of  the  National  Association 
of  Manufacturers  and  president  of  the  Citizens'  Industrial  Association  of 
America,  says  on  tin-  subject: 

-The  agitation  for  supplanting  private  control  over  capital  appears  to  dis- 
close two  distinct  methods  for  the  accomplishment  of  its  objects.  One  is  that 
of  confiscation — tin-  passage  of  legislative  enactment  and  the  adoption  of  other 
means  to  reduce  profits  and  to  limit  private  management  of  capital.     The  other 

390 


SOCIALISM.  391 

is  that  of  acquiring  government  control  through  purchase  from  the  present 
individual  owners.  That  form  of  socialistic  endeavor  which  seeks  government 
control  of  capital  by  purchase  is  at  present  limited  to  the  acquirement  of  public 
utilities.  Attempts  in  the  line  of  municipal  ownership  have  for  the  most  part 
resulted  unfavorably  to  the  claims  made  by  its  advocates.  Government  cannot 
manage  capitalistic  enterprises  as  economically  or  as  efficiently  as  private 
owners.  A  large  increase  in  the  number  of  its  employes  is  certain  to  threaten 
the  domination  of  our  democratic  government  by  an  officeholding  class,  and  the 
corruption  of  politics  under  private  ownership  of  corporations  would  be  as  noth- 
ing compared  with  the  corruption  that  would  most  likely  exist  under  govern- 
ment ownership. 

"While  the  enlargement  of  the  scope  and  power  of  government  by  the  pur- 
chase and  management  of  certain  enterprises  has  found  considerable  support 
among  the  people,  vet  I  believe  the  sentiment  favorable  to  socialistic  measures 
involving  the  confiscation  of  profits  and  the  limitation  of  private  management 
of  capital  is  the  more  widespread  an. I  dangerous.  Without  making  special  ref- 
erence to  the  aim  of  the  avowed  socialist,  we  have  organized  labor  and  its 
sympathizers  supporting  the  idea  that  organizations  of  men  may  dictate  to  a 
large  extent  the  management  of  enterprises  which  the\  do  not  own.  determining 
the  rate  of  wages  and  fixing  the  hours  of  employment.  Another  illustration  of 
this  kind  of  socialistic  sentiment  is  manifested  m  the  present  agitation  to  have 
the  government  fix  railroad  rates." 

On    the   other   hand    the    Boston    Herald,   confronting    Hie    tact    tlial    Socialism 
is   based   on   the  desire  to  abolish   all    parties   save  one.   I  li.it    of  all   society    in    liar 
monioUS  act  ion,   has  t  his  to  saj  : 

■•Denunciation  of  Socialism,  which  i.  inspired  l,\  the  misunderstanding  and 
selfishness  of  those  who  have  wealth,  will  not  put   it  down.     On  the  contrary,  it 

will    breed    Socialists    and    make    them    bitter    and    desperate.       The\     ma\     be    in 

error  as  to  fads  and  the  right  cure  for  tin  evils  the}  feel;  but  thej  cannot  be 
made  to  change  then-  minds  by  .im\  course  that  damns  their  ignorance  and  their 
'motive.  As  for  then-  motive,  it  is  quite  as  generous,  as  patriotic,  and  moral  as 
that  winch  actuates  those  who  cherish  a  conceit  of  superiority.  Bishop  Potter, 
Carroll  I).  Wright,  Washington  Gladden  and  man}  others  who  have  had  much 
to  do  with  the  settlement  of  controversies  between  employers  ami  employed,  have 
testified  emphatically  that  in  their  experience  the  workingmen  were  not  the 
least  intelligent,  reasonable  and  fair-minded  to  the  controversy  under  consid 
erat  ion. 

Socialism  as  ••'  theori  of  government  mi\  hi   subject  to  nianA  serious  objec 


SOi  It  I. ISM. 

tion^;  luit  plutocracy  and  monopoly  are  more  objectionable  on  many  account's, 
and  vastly  more  hostile  to  everj  genuine  ideal  of  a  democratic  commonwealth. 
Hence  they  are  aiore  to  be  distrusted  b\  the  Christian  and  the  sagacious 
patriot.  Those  whose  fundamental  aim  is  to  promote  essential  equality  of  con- 
ditions  and  opportunities,  of  work,  privileges  and  responsibilities  are  not  neces- 
sarily the  mosi  dangerous  class  of  citizens,  nor  is  there  any  prima  facie  reason  for 
regarding  them  as  the  mosi  incapable,  immoral  and  fanatic.  At  any  rate,  they 
are  not  already  conspicuous  for  dishonesty  in  business  and  dishonor  in  politics. 
The  corrupting  bribers  and  grafters  do  not  come  from  their  ranks.  They  are 
not  to  blame  for  a  situation  which  makes  Socialism  seem  tolerable  to  many 
serious  minds  as  a  correction  of  wrongs  which  grind  the  poor  and  make  the 
future  seem  hopeless  of  betterment." 

Hut  simultaneous  with  these  cries  of  warning  one  of  the  greatest  weaves 
of  feeling  of  socialistic  tendency  swept  over  the  city  of  Chicago  and  resulted 
in  the  election  of  Mayor  E.  F.  Dunne  on  the  avowed  platform  of  immediate 
municipal  ownership  of  the  street  car  lines  of  the  city,  which  had  been  noto- 
riously  hadlv  run.  which  had  been  the  means  of  mulcting  the  investing  public 
of  tlu  city  of  millions  of  dollars  and  which  at  last  had  been  turned  into  the 
bankruptcy  court.  Here  was  a  demand  for  some  improvement  upon  capi- 
talistic- methods,  with  the  belief  that  any  change  would  be  better  than  the 
intolerable  service  given  the  public  at  that  time.  Nor  was  this  tendency  foi 
municipal  ownership  and  governmental  control  of  public  utilities  confined  to 
Chicago.  It  was  seen  in  the  cry  for  railway  rate  regulation,  in  the  Kansas 
Legislation  for  state  oil  refineries  to  supplant  those  of  the  Standard  Oil  whom 
Kansas  had  kicked  out  of  her  borders,  in  the  investigation  into  the  evil  prac- 
tices of  the  Beef  Trust  and  private  car  lines  and  in  a  hundred  other  phases. 
A  New  York  paper  in  commenting  on  the  assemblage  that  attended  popular 
lecture-   at    Cooper  Union    iii    New    York   City   says: 

"After  a  lecture  a  few  days  ago  in  which  the  Socialist  cheering  had  been 
unusually  vociferous  till  it  seemed  to  characterize  the  whole  gathering,  a  little 
in  the  form  of  a  standing  vote  was  taken.  It  appeared  that  out  of  some 
1,200  people  there  were  only  fifteen  or  twenty  Socialists.  Three  persons 
expressed  themselves  as  entirely  satisfied  with  existing  industrial  conditions. 
When,  however,  it  was  asked  how  many  believed  that  'the  time  has  come  for 
the  community  to  asserl  a  larger  control  over  public  service  enterprises,  such 
a>  trusts,  railroad-,  gas,  etc.,'  apparently  the  entire  audience  rose.  Here  was 
clearly  an  audience  which,  however  much  one  may  choose  to  call  it  Socialistic, 
had    nothing   wild,   theoretical   or  essentially    impractical   about  it.      It  was  com- 


SOCIALISM.  ;39:J 

posed  of  men  and  women  who  had  come  into  close  contact  with  facts,  and  who 
were  drawing  their  theories  out  of  their  facts,  not  trying  to  make  their  facts 
fit  theories.  It  was  a  typical  audience;  typical  of  the  good  old  practical 
methods  by  which  Englishmen  and  Americans  have  solved  their  historic  prob- 
lems and  built  up  their  progress;  typical  of  the  public  opinion  of  this  country 
today  as  it  reflects  on  evils  and  seeks  remedies.  It  is  not  improbable  that 
almost  anv  general  audience  of  1,000  men  and  women  in  any  part  of  this 
country    would   show    much   the   same   proportions   of   sentiment." 

At  once  there  arises  the  question  as  to  why  and  how  sentiment  i>  rising 
to  change  the  whole  existing  scheme  of  industrialism  under  private  ownership 
ami  to  make  it  co-operative  in  the  hands  of  all  society.  Both  method  and 
cause  are  explained  in  part  by  a  demonstration  which  developed  coincidently 
with  the  teamsters'  strike  of  1905  in  Chicago,  an  incident  which  is  now  bo- 
come  common  to  many  such  disturbances.  This  was  the  active  soliciting  of 
laborer-  to  forsake  trade  unions — which  the  Socialists  consider  but  a  make- 
shift and  incentive  to  constant  war  between  classes  of  labor  and  capital — and 
to  join  in  the  Socialist  movement  to  change  the  whole  system  once  for  all. 
This  effort  to  socialize  the  union  man  is  seen  in  such  a  statement  as  the  follow- 
ing by  William  Mailly,  who  conducted  the  Debs  campaign  of  1904: 

"The  supremacy  of  the  working  class  is  inevitable.  It  is  just  such  con- 
flicts ,(s  this  teamsters'  strike  that  proves  to  wage  workers  that  they  must 
control  the  powers  of  government  if  they  would  get  justice.  Should  the  power 
of  wealth  and  government,  in  the  hands  of  the  capitalist  class,  defeat  the 
magnificent  drivers'  organization  the  day  when  the  working  class  will  abso- 
lutely control  the  entire  affairs  of  this  city  and  of  the  nation  will  be  brought 
nearer.      When    unions   are   defeated    in    strike   efforts    they    are    in    a    position    to 

s,e  clearh    that    they   must    vote  themselves   into   power  and  conduct    industry 
entirely   for  the  benefit   of  all   tin-  working  class." 

In.  the  following  by  Charles  II.  Kerr,  an  active  Chicago  Socialist 
leader,  is  typical  of  the  attitude  of  the  organized  Socialists  to  accomplish 
proselytes  of  the  trade  unionists  .lining  the  teamsters'  sinke: 

"Naturally,  being  the  party  of  the  working  class.  we  are  on  the  side  of 
the  union-.  This  does  not  mean  that  we  indorse  every  -Mail  of  the  unions' 
methods  of  fighting,  but  we  recognize  that  the  class  war  is  on,  and  the  laborers 
must  fight  as  they  can,  with  the  means  at  their  disposal. 

«Ia   ji    true   that    the   Socialists  are   taking  advantage  of  the  situation   to 

-i  inn      ron\  i  H  -  ' 

••It    ccrtainh    is.     When   we  bcc  a   union   man   indulging   in   profanity   be- 


.;.)(  SOCIALISM. 

cause  1 1 u  policemen  are  riding  on  the  'scab'  wagons,  we  ask  him,  'Isn't  that 
what    you   voted   for?' 

••\low   do  the  unionists  receive  the  Socialist   organizers? 

"There  is  a  marked  change  in  their  attitude.  Nut  so  very  long  ago  a 
Socialist  would  invariably  be  hooted  dowji  or  refused  the  floor  at  a  union 
meeting;  now  the  union  men  almost  invariably  seem  anxious  to  hear  what  our 
speakers  have  to  say. 

"What  effect   will  the  strike  have  on  the  growth  of  the  Socialist   party? 

"It  will  undoubtedly  bring  us  an  immense  increase  in  our  vote.  We  have 
constantly  pointed  out  that  the  old  parties  represented  capitalist  interests, 
and  that  the  only  rational  course  tor  the  laborers  was  to  vote  tor  the  Socialist 
partv,  the  party  of  their  own  class.  In  ordinary  times  this  is  no!  so  easy  to 
see,  hut  the  action  of  the  employers  in  handing  together  against  the  unions, 
and  using  the  police  and  the  courts  as  weapons,  has  made  it  evident  to  the 
great  body  of  union  men  that  we  are  right.  If  the  employers  succeed  in 
crushing  the  teamsters'  union,  the  result  all  over  the  city  will  be  like  the  result 
in  the  stockyards  districts  last  fall.  The  packers  won  a  glorious  victory  over 
the  union-,  and  the  unions  responded  by  sending  two  Socialists  to  the  legisla- 
ture. Union  crushing  on  a  larger  scale  will  result  in  drawing  class  lines  more 
clearly  than  ever  before,  and  when  class  lines  arc  drawn  it  will  be  evident  that 
the  people  who  live  by  working  have  more  votes  than  the  people  who  live  by 
owning.  Then  the  laborers  will  elect  their  own  city  officers,  and  proceed  to 
run  the  city  to  suit  themselves,  without  regard  to  the  'business  interests'  of  the 
capitalists."" 

Thus  far  it  has  not  seemed  advisable  here  to  define  that  industrial  move- 
ment which  we  are  discussing.  There  have  been  many  sorts  of  doctrines  held 
by  tho>e  who  have  claimed  the  title  of  Socialists.  It  is  not  intended  here  to 
-et  forth  the  numerous  different  creeds  that  have  existed  in  the  name  of 
Socialism  or  which  still  exist.  Suffice  it  that  there  are  those  who  sec  or  think 
they  see  a  tendency  toward  an  industrial  millennium  where  men  shall  not  be  at 
war  witli  each  other,  where  the  "square  deal"  shall  be  a  rule  of  every-day  con- 
duct. These  men  believe  that  the  most  effective  methods  of  producing  wealth 
have  been  found  to  exist  under  CO-OPERATION.  The  great  desire  now  is  to 
effect  a  more  just  DISTRIBUTION  of  wealth  produced  through  similar  CO- 
OPERATION.  They  point  to  the  fact  that  the  trusts  have  grown  so  large 
that  apparently  the  next  step  is  to  make  the  whole  country  one  trust  in  which 
every  citizen  shall  be  practically  a  stockholder.  How  this  is  to  be  accom- 
plished  none  of  them  knows.      Indeed   the  disciples  of  Socialism  say   it   does  not 


SOCIALISM.  895 

mutter  just  what  the  ways  and  means  shall  be.  They  point  to  the  very 
serious  problem  of  slavery  which  confronted  this  nation  with  apparently  no 
solution.  The  freedom  of  the  slaves  no  doubt  worked  great  hardship  to  the 
southern  planters,  but,  say  the  Socialists,  this  was  inevitable  and  the  means 
finally  developed  almost  spontaneously.  So,  they  say,  will  come  the  change, 
NUT  bv  which  every  person  shall  have  an  equal  share  of  the  goods  of  the 
world,  but  by  which  the  means  of  production  shall  be  OWNED  BY  ALL 
SOCIETY,  and  thus  shall  be  used  to  promote  GENERAL  WELFARE 
instead  of  frequent   .MISERY  and  WANT. 

That  this  tendency  toward  Socialism  is  growing  is  suggested  pointedly  in 
this  warning  to  capital  by  the  leading  financial  paper  of  the  country  and 
organ  of  the  moneyed   interests,  the  Wall   Street  Journal: 

"We  have  believed  for  a  long  time  that  Socialism  was  bound  to  become 
more  and  more  an  issue  in  this  country,  an  issue  which  the  conservative  forces 
in  politics  and  in  business  would  be  obliged  to  meet,  and  which  tiny  might  find 
it  difficult  to  overthrow.  The  best  way  of  combatting  Socialism  is  to  remove 
those  conditions  which  are  favorable  to  its  growth.  Competition  and  Socialism 
represent  the  two  extremes  of  economic  theory  and  practice.  The  hope  of  the 
Socialists  is  in  a  complete  breakdown  of  the  competitive  system,  and  hence  it 
is  that  they  welcome  the  growth  of  monopoly.  They  believe  that  the  capi 
talists,  who  are  building  up  the  great  corporations,  and  concentrating  the 
control  of  the  productive  and  transportation  interests  of  the  country  into  a 
few  hands,  thus  steadily  reducing  the  area  of  active  competition  arc  doing 
the  preparatory  work  for  Socialism.  Let  the  forces  of  capital,  tin  \  Bay,  build 
up   the   monopolies,  thus  overthrowing  competition,  and   then   the   people  will 

Step    in,   overthrow    the   monopolies   and   establish    the    regime   of   Socialism. 

"There  seems  to  be  no  escape  from  the  logic  of  this  statement.  Monopoly 
j,  only  tin  advance  ageni  of  Socialism.  What,  then,  should  be  done  to  unci 
this  condition.'  It  seems  to  us  as  if  some  of  our  gnat  industrial  and  financial 
leaders  are  either  strangely  blind  to  the  signs  of  tin  times,  or  else  exaggerate 
their  own  strength,  trusting  in  their  ability  to  defeal   Socialism  in  any  square 

t •  —  t    that    may  develop  in   the   future.      They  are,  ai    any   rati,  as  a   class,  steadik 

resisting  any   movement    intended  to  enlarge  the  area  of  competition,  to  hunt 

the    power   of    tin     corporal  ion,    to   extend    the    scope   o|     publicity,    and    to    bring 

interstate  commerce  more  and   more  under  reasonable  government    regulation. 

These    measures    are    the    onlj     ones    which    appear    at     this    linn      like|\     In    cluck 

the  spread  of  Socialism  iii  this  coiuitr\  l>\  preventing  the  further  progress  of 
monopol  \. 


;:i(;  SOI  I  il  ISM. 

"There  are  onlj    three  possible  alternatives: 

"Firsl  A  further  concentration  of  the  control  of  production  and  com- 
merce in  this  country,  so  as  to  produce  a  condition  in  which  competition  shall 
In    reduced  to  a  minimum. 

"Second — Socialism,  the  seizure  of  the  machinery  of  production  and  trans- 
portation in  the  name  of  the  state,  the  establishment  of  the  collective  common- 
wealth. 

"Third — A  system  in  which  capital  shall  have  the  liberty  to  combine  in 
corporations,  but  shall  be  subject  to  a  law  of  publicity,  compelled  to  account 
for  its  acts  to  the  people,  and  held  under  reasonable  government  regulation, 
so  that  a  proper  balance  shall  he  preserved  between  concentration  and  com- 
petition." 


CHAPTER   XXXVI 
GRAFT  IN  AMERICAN  CITIES. 

The    Plundering   of    the    Private   Citizen-  Public    Conscience    Aroused      Phila- 
delphia Corrupt  but  no  Longer  Contented     Signs  of  Hope  for  the  Future. 

There  is  a  word  which  was  originally  innocent,  hut  which  of  late  years  has 
come  to  have  a  meaning  so  offensive  and  so  tainted  that  the  very  sound  of  it 
has  become  a  stench  in  the  nostrils  of  honest  nun.  It  is  the  word  "graft," 
which  by  an  extrusion  of  applications  has  come  to  mean  almost  every  phase  of 
public  and  private  dishonesty  outside  of  the  lines  of  statutory  crime,  and. 
indeed,    often    crime   as    well. 

In  the  earlier  days  the  use  of  the  word  was  limited  to  the  thrifty  and 
wholesome  science  b\  which  horticulturists  modified  and  improved  the  fn.it 
trees  under  their  care.  This  involved  the  draining  <»f  the  .a,,  from  a  parent 
stalk  into  a  limb  from  another  tree  which  would  therein  be  mi, .ported  by  tin 
borrowed   nourishment. 

The  parallel  Is  a  plain  one.     Graft  today  means  the  draining  of  the  suste 
nance  from  on.-  source  into  a  parasitic  personage  who  seeks  to  obtain   profit,  not 
out  of  hi>  industry,  hot  out  oi   the  thrift  of  someone  else.    Sometimes  it  might 
be  characterized  as  blackmail,  sometimes  as  bribery,  and  sometimes  as  thinh 
veiled  theft,  but  always  it   is  predatory  upon  private  ami  public  resources. 

II  is  quite  possible  that  the  thin-  itself  has  always  existed  in  some  form  or 
other,  but  apparently,  of  late  years,  there  has  been  a.,  extension  I  i  practice 
into  channels  heretofore  f <«  -  from  the  offense.  In  greater  or  less  degree  it 
[g  to  be  found  in  everj  country,  but  here  in  America,  where  we  hav<  free  insti 
tutions  that  we  prize,  and  a  pride  in  our  national  thrift,  vigor  and  honesty 
that  amounts  almost  to  braggadocio,  the  offensive  .mouth  las  waxed  more 
siurdilv  than  in  any  other  country  which  is  blessed  by  Western  civilization. 

The  redeeming  fact  is  that  with  the  growth  of  the  evil  there  seems  to  have 
come  a  corresponding  growth  of  appreciation  and  realization.  Today  the 
forces  of  decencj  and  honesty  an-  bestirring  themselves  as  never  before,  to 
exterminate  the  vicious  practices  that  are  lump., I  together  under  the  general 
tainted  titl.  of  "graft."  The  press  is  thundering  at  the  malefactors. 
Public  speaken  in  all  walks  of  life  a,-,  devoting  attention  to  lb.-  same  Bubject. 

:W7 


;:>s  GRAFT    IX    AMERICAN    CITIES. 

The   people   indeed  are  becoming  aroused  to  the  just    indignation  that   should 
be  visited  upon  the  evil  doers  alike  in  high  and  low  places. 

The  ramifications  of  the  spirit  of  graft  are  manifold.  They  crop  out  as 
definitely  in  private  enterprises  as  they  do  in  public  affairs.  Hut  inasmuch  as 
the  public  in  concerned  chiefly  with  public  interests,  let  us  first  survey  the 
facts  that  have  been  developed  iii  certain  investigations  where  the  grafters 
were  preying  upon  the  public  welfare.  No  writer  can  discuss  this  general  sub- 
ject fairly  without  expressing  a  debt  to  the  noteworthy  work  done  by  Lincoln 
bteffens  in  McClure's  Magazine,  through  which  publication  lie  gave  utterance 
to  discoveries  perhaps  the  most  significant  that  have  yet  been  made  in  this 
line.  With  the  temperament  of  a  judicial  observer,  Mr.  Steffens  sought  the 
truth  wherever  he  could  find  it,  and  wrote  without  fear  or  favor  the  facts  as 
saw  them..  But  neither  Mr.  Steffens  nor  any  other  writer  could  discover 
or  tell  all  of  the  truth,  for  the  facts  are  continually  developing,  and  graft  is 
is  truly  progressive  as  is  any  other  industry.  Let  us  take  an  example  which 
will  at  the  same  time  illustrate  this  point  and  also  show  the  shamelessness 
ot    the  grafters  and  the  hope  of  honest  men. 

One  of  the  most  conspicuous  of  Mr.  Steffens'  disclosures  related  to  Phila- 
delphia, which  he  characterized  as  "corrupt  and  contented/'  Even  while  this 
volume  is  approaching  a  conclusion,  new  developments  in  Philadelphia  show 
conditions  which  have  arisen  of  late,  quite  as  bad  as  anything  disclosed  in  the 
investigations  of  1903,  if,  indeed,  not  worse,  and  at  the  same  time  a  revolt  has 
'n.  i  u  stimulated  which  promises  to  lift  Philadelphia  out  of  the  mire  and  raise 
it    to  the  proud  estate  which   it   ought   to  occupy. 

For  many  years  all  of  the  larger  American  municipalities  have  pointed  at 
Philadelphia  as  the  worsi  governed  and  most  thoroughly  corrupt  city  in  the 
knd.  This  fact  has  been  almost  universally  admitted,  and  it  has  been  doubly 
significant  because  this  is  the  most  American  of  all  the  large  cities,  having 
nearly  one-half  of  its  population  of  genuine  American  stock,  native  born,  of 
native  born  parents.  Furthermore,  Philadelphia  is  a  prosperous  city,  a  city 
of  homes  without  crowded  slums  of  the  worst  sort,  an  aristocratic  city,  and  .« 
historical  city  with  American  traditions  and  a  place  in  the  American  fight  for 
freedom  from  British  rule  And  yet  in  spite  of  all  this  the  political  and  civic 
corruption  of  this  great  American  city  has  stood  at  the  very  top  of  the  dis- 
graceful list  and  the  hones!  people  of  Philadelphia  have  rested  in  complacency, 
doing  little  to  emancipate  themselves  from  their  slavery  to  corruption. 

l',\    unquestionable  evidence  we  have  it  clearly  proven  that  the  control  of  the 
polls  in   Philadelphia  for  years  has  been  absolutely  fraudulent,  with  little  pro- 


GRAFT   IN    AMERICAN    CITIES.  399 

test  against  the  offense.  The  profit  of  graft  and  fraud  in  such  a  city  cornea 
from  thievery  in  public  contracts.  The  various  systems  and  contracts  In  winch 
the  civic  conveniences  arc  furnished,  such  as  water,  light,  paving,  transporta- 
tion, order  and  safety,  have  been  farmed  out  to  the  leaders  of  the  political 
rings  by  methods  in  which  apparently  every  department  of  the  municipal  gov- 
ernment, including  the  judiciary,  participated  in  the  frauds.  It  is  impossible  bo 
charge  any  particular  political  party,  or  church,  or  nationality,  with  sole  guili 
in  this  matter,  for  apparently  people  from  every  circle  haw  participated  in 
the  plundering  processes.  Furthermore,  the  local  leaders  have  been  in  partner 
ship  or  subordinate  to  the  state  leaders,  so  that  the  graft  ramified  into  state 
and  even  national  politics.  It  is  almost  futile  to  name  individuals  as  chiefly 
responsible,  when  as  a  matter  of  fact  even  those  who  control  the  operations 
are  hut  part  of  a  system  for  which  every  citizen  shares  the  responsibility.  It 
does  nol  seem  unfair  to  say,  however,  that  such  national  figures  as  the  late 
Senator  Matthew  Quay,  and  Samuel  H.  Ashbridge,  who  served  as  mayor  for 
four   years,   have  hem   involved   in  the  severest   charges,  the  former  even  being 

Indicted. 

The  Municipal  League,  which  is  an  organization  in  Philadelphia  striving 
for  civic  decency,  published  the  following  summary  of  the  career  of  Mayor 
Ashbridge,  when  his  term  ended  in  the  spring  of  190:5: 

-The  four  years  of  the  Ashbridge  administration  have  passed  into  history 
leaving  behind  them  a  Bear  on  tin-  fame  and  reputation  of  our  city  which  will 

,  long  time  healing.  Never  before  and  lei  us  hope  never  again,  will  there 
l„  sUCh  brazen  defiance  of  public  opinion,  such  flagranl  disregard  of  public 
interests,  such  abuse  of  powers  and  responsibilities  for  private  ends.  These  are 
not  generalizations,  hot  each  stateraenl  can  be  abundantly   proved  by  numerous 

instanci 

The  charges  included  in  this  report  involve  such  things  as  attempted  intimi 
dation   of  citizens,   the   introduction   of  gambling  into   the  public  schools,  the 
charging  of  school  teachers  for  appointments  t<>  positions,  and  manifold  pari 
nerships  with  vice  of  the  grosscsl   forms. 

Perhaps  the  most  conspicuous  detail  in  the  Philadelphia  fighl  was  ihe  affair 
of  ihe  street  car  franchises,  which  were  passed  hastily,  almost  clandestinely,  by 
a  collusion  of  the  state  legislature  .owl  the  cii\  council,  Governor  Stone  and 
Mayor  Ashbridge,  and  various  political  leaders  of  the  ring.  Without  remun 
eration  to  the  citv  these  franchises  gave  away  rights  to  the  streets  of  a  tic 
mendous  value  I,,  the  efforl  to  bloc*  the  scheme.  John  Wanamaker  made  a 
formal  offer  of  s'.\ 500,000  for  the   franchises  which  were  being  give.  away. 


too  GRAFT    /.V    AMERICAN    CITIES. 

i|1(  ni;i\or  threw  In-  letter  into  the  street  unread,  and  the  offer  was  refused. 
Next  Hie  state  legislature  passed  a  ridiculous  law  manifestly  intended  to  tnuz- 
sle  the  press,  and  all  honesl  critics  of  the  corruption  thai  existed. 

Then  came  the  election  of  a  new  mayor  named  John  Weaver,  chosen  by 
the  ring,  but  apparently  promising  to  stand  by  the  people  when  frauds  should 
be  attempted.  It  is  interesting  to  note  that  for  two  years  his  administration 
did  little  to  justify  the  hope  that  had  been  placed  in  him.  Hut  in  the  spring  of 
1905  came  his  opportunity  to  prove  his  good  faith.  A  measure  was  before 
the  city  council  by  which  certain  gas  franchises  were  to  he  given  away,  as 
lightly  as  were  the  street  railway  franchises  two  years  before.  At  last  the 
city  seemed  to  be  roused  to  some  realization  of  what  was  going  on.  M;iss 
meetings  were  held  everywhere  to  attack  the  nefarious  scheme.  Citizens  at- 
tended the  council  meetings,  and  dangled  ropes  with  nooses  at  one  end,  over  the 
gallery  railing. 

Savs  one  dramatic  account  of  the  uprising:  "Philadelphia  has  at  last 
responded  to  the  rising  national  tide  of  civic  conscience  and  civic  conscious- 
n<  ss.  The  gnat,  dumb,  comfortable  mass  of  small-incomed  families  was 
moved.  A  machine  morning  paper,  which  after  some  days  of  silence  incautiously 
espoused  the  cause  of  the  machine  on  a  critical  morning,  had  nearly  five  hun- 
dred postal  cards  stopping  the  paper  the  next  morning,  and  it  never  spoke 
again.  In  schoolhouses  after  school  hours  the  children  of  councilmen  who  had 
voted  for  tin  lease  went  crying  home,  because  no  child  would  play  with  the 
sons  and  daughters  of  a  gas  thief.  Councilmen  in  grocery  and  provision 
stores  found  their  patrons  suddenly  gone.  .Men  were  expelled  from  clubs  and 
benefit  orders,  and  warned  to  resign  from  ward  celebrations  of  Memorial  Day. 
One  blatant  supporter  of  the  lease  in  the  council  found  his  ward  placarded  with 
his  picture,  his  house,  his  political  headquarters  and  his  business  place.  The 
ts  he  passed  over  daily  were  noted,  the  hour  given,  and  every  citizen  asked 
in  stop  him  and  say,  "Why  did  you  vote  for  the  gas  lease?'  This  and  noth- 
ing more,  men  did,  by  the  dozen  and  the  score.  For  one  day  he  was  brutally 
defiant,  for  another  irritably  bellicose.  Hut  no  man  can  stand  being  asked 
why  he  is  a  thief  bv  everybody  he  has  known  from  childhood,  and  by  the  third 
or  fourth  day  he  had  capitulated,  sought  the  mayor,  and  agreed  to  support  his 
veto.  This  uprising  from  below  of  tin-  great  throng,  would,  after  all,  have 
failed  without  a  Leader.  For  two  years  Mayor  John  Weaver  had  been  a  man 
numbed  by  hopeless  conditions  and  under  the  personal  influence  of  a  shrewd. 
masterful  boss.  Hut  he  was  a  man  of  principle,  and  he  was  treated  with  stud- 
ied insolence  by   men   who  despised  his  principles.     When   the  hour  struck  he 


GRAFT   IN    AMERICAN    CITIES.  401 

acted,  and,  as  with  all  nun  who  act,  the  citj  rose  to  him  as  one  man.  Sud- 
denly in  a  wick  Philadelphia  knew  itself.  The  dumb  driven  city  became  a 
sentient  thing.  The  council  which  had  passed  the  lease  collapsed.  The 
machine  was  smashed." 

Of  course  not  all  of  this  successful  fight  against  corruption  in  Philadel- 
phia was  carried  to  a  conclusion  without  temporary  defeats  and  hard  strug- 
gles. Nevertheless,  the  fact  that  the  glaring  $25,000,000  gas  -teal  aroused 
the  citizens  of  Philadelphia  to  he  no  longer  contented  in  a  state  of  corrup- 
tion, of  which  they  were  victims  and  for  which  they  were  largely  responsible, 
i-  an  evidence  of  what  can  be  done  in  other  cities  where  graft  ha-  been  hardl;. 
It  ss  shameless. 

The  very  title-  of  the  chapter-  in  Mr.  Steffcns'  quest  are  significant  of  the 
form  the  fight   has  taken — "Tweed  Days  in   St.   Louis,"  "The  Shame  of  Min 

polis,"  "The  Shamelessness  of  St.  Louis,"  "Pittsburg  a  City  Ashamed," 
"Philadelphia  Corrupt  and  Contented,"  "Chicago  Half  Free  and  Fighting  On," 
— these  are  characteristic  titles  under  which  some  of  the  disclosures  have  been 
published  to  the  world. 

In  each  of  these  cities  there  have  been  characteristic  facts  peculiar  to  the 
place  itself.  For  instance,  St.  Louis  was  struggling  against  the  corrupt 
awarding  of  municipal  franchises.  In  Minneapolis  the  trouble  was  a  foul 
partnership  between  the  corrupt  city  administration  and  the  worst  haunt-  of 
vice,  in  which  the  profit-  of  the  vice  were  divided  with  the  officials.  Pittsburg 
u.i-  cursed  with  more  or  less  of  both  of  these  troubles,  when  the  citizens  roused 
themselves  to  attempt  a  betterment  of  thing-.  In  Chicago,  as  in  St.  Louis,  it 
ua-  a  dishonest  council  with  which  honesty  had  to  contend,  but  those  condi 
tions  havi  been  corrected  in  large  degree  by  an  awakened  civic  sense,  led  l>\  an 
organization  called  the  Municipal  Voters'   League. 

\Y  have  used  Philadelphia  as  an  example  of  corruption  and  an  example  ol 
id,,  effort  to  reform,  -impl\  because  it  stands  today  so  conspicuous  in  the  list. 
V  fertheless,  strange  ;i-  it  ma)  seem,  little  has  been  accomplished  in  <>ne  eit\ 
by  holding  up  fh<-  example  of  another.     Each  comniunit}   has  had  to  work  out 

own  salvation,  and  some  of  thru,  are  -till  backward  in  accomplishing  this  or 

n  in  attempting  it.  Furthermore,  it  is  not  the  great  cities  of  our  countr} 
Lhat  have  a  monopol}  of  vice  in  the  form  of  graft.  All  the  waj  up  from  tin 
country  village  l<>  the  metropolis,  th<  same  chain  can  he  traced,  differing 
chicfh  in  the  magnitude  of  the  plunder  available  in  the  larger  cities,  but  dif 
f<  ring  not  at  all  in  kind. 

Nor  i-  the  offense  of  graft   confined  to  thi    cities  of  large  foreign   populn 


MS  GRAFT   IS    AMERICAN    CITIES, 

lion,  or  those  in  the  older  and  more  thickl)  settled  parts  of  the  country.  In 
the  waterworks  steal  at  Grand  Rapids,  Mich.,  facts  just  as  disreputable  were 
developed  as  in  the  worst  phases  of  the  Philadelphia  affair.  Even  now  Bos 
ton  is  just  passing  through  a  conflict  over  its  gas  franchises  which  promises  to 
\u  as  vital  to  the  citizens  of  thai  historic  center  of  liberty,  the  site  of  Faneuil 
Hall,  as  that  other  fight  in  Philadelphia,  under  the  shadow  of  the  room  where 
the  Declaration  of  [ndependence  was  signed. 

In  Boston  the  good  citizens  have  rallied  together  to  support  the  move  for 
civic  decency,  but  strangely  enough  they  have  not  had  the  support  of  the  pub- 
lic press  to  the  degree  that  t  he  v  should  have  had,  thanks  to  the  fact  that  the 
element  opposed  to  them  had  command  of  large  sums  of  money,  part  of  which 
went  to  the  newspapers  in  the  guise  of  payment   for  advertising. 

It  is  not  alone  in  cities,  hut  in  states  as  well,  and  even  in  the  nation,  that 
the  serpent  of  graft  raises  its  head.  In  the  State  of  Illinois  for  years  the 
good  citizens  have  had  to  tight  against  the  dominance  of  corrupt  political  rings 
between  which  there  was  hardly  any  choice,  although  they  wore  the  political 
labels  of  the  two  great  parties.  There  is  no  partizanship  in  political  graft, 
,  scepi  as  the  party  label  assists  in  the  game.  The  grafters  are  never  troubled  by 
tin  ethical  principles  involved  in  political  controversy.  To  them  the  gas  fran- 
chises, the  street  railways,  and  all  sorts  of  public  contracts,  are  legitimate  ave- 
nues for  profit  by  plundering  the  public.  In  Illinois  the  park  boards,  the  san- 
itary hoards  the  drainage  canal  system,  the  insane  asylum  and  the  peniten- 
tiaries even,  have  been  preyed  upon  by  republican  bosses  and  democratic  bosses 
alike,  through  a  system  which  involves  in  its  organization  the  federal  influence 
in  the  state,  the  state  administration  itself,  and  as  junior  partners  the  county 
<.f  Cook  and  the  city  of  Chicago,  with  business  men,  hankers,  and  public  men 
who  pretend  to  he  worthy  citizens,  controlling  the  details  and  sharing  the 
profit^,  either  financial  or  political. 

\\  ,  find  tin-  same  thing  true  in  Wisconsin,  where  for  the  last  few  years 
there  has  been  a  most  picturesque  fight  between  the  people  on  one  side,  with 
Governor  Robert  M.  LaFollette  as  their  leader,  and  the  railways  on  the  other 
side,  with  the  federal   power  in  the  state  in  close  alliance. 

In  Missouri  another  governor  has  arisen  to  fight  the  battle  of  the  people, 
in  the  person  of  Joseph  W.  Folk,  who  has  done  more  to  terrorize  the  rich  and 
powerful  boodlers  of  that  commonwealth  than  all  the  other  powers  that  have 
ever  been  brought  to  hear  upon  them.  As  district  attorney  in  St.  Louis,  Mr. 
Folk  was  able  to  indict,  convict  and  send  to  the  penitentiary  or  drive  out  of 
the  country  as  fugitives  from  justice,  a  score  of  the  richest  and  most  influen- 


GRAFT   IN   AMERICAN    CITIES.  *03 

tiul  men  of  the  city,  some  of  them  reckoned  as  merchants  and  financiers  of 
the  highest  standing  in  the  community.  In  doing  this  he  broke  up  a  gang- 
that  had  been  plundering  the  city  and  the  state  for  years,  and  now  as  a 
reward  for  his  sincerity  he  is  serving  as  governor  and  continuing  the  good 
work  in  broader  channels. 

Thus  it  is  that  we  feel  justified  in  saving  that  there  has  been  a  real  awak- 
ening of  the  civic  conscience  in  late  years,  and  that  there  is  a  prospect   for  a 
constant   betterment   of  conditions.     Wherever  we  look  we  see  a  brighter  out 
look  in  the  situation.     Those  spoils  politicians  of  Philadelphia   who  cherished 
the  belief  that  the  reform  wave  would  expend  it-  strength  in  a  short   space  of 
time,  must  be  considerably  exercised  over  the  increasing  strength  of  the  move 
ment.      There  is  a   pertinent   utterance  on   the  subject   in  the  letter  written  by 
Grover  Cleveland  accepting  his  appointment  as  one  of  the  trustees  of  the  Equi 
table  Life  Assurance  Company.     In  the  letter  which  tendered  him  the  trustee 
ship,  Thomas  F.  Ryan,  who  is  now  the  dominant  figure  in  the  Equitable,  said: 
"The  duties  of  the  trust  will  be  light,  as  in  the  nature  of  things  when  a  satis 
factory    board    is    once    constituted,    there    are    few    changes   and    all    the   clerical 
and  formal  work  will  be  done  by  the  official  force  of  the  company." 

Mr.  Cleveland  does  not  seem  to  be  particularly  impressed  with  the  desira 

bility  Of  having  his  duties  as  trustee  lightened  for  him.  He  accepts  on  "th( 
express  condition  that  the  trustees  are  to  be  absolutely  free  and  undisturbed 
in  the  exercise  of  their  judgment."  In  electing  directors  to  represent  the 
policy  holders  th.y  must  be  permitted  to  follow  faithfully  Up 
policyholders'  real  wishes.  By  way  of  making  his  attitude  still  clearer  Mr. 
Cleveland  makes  some  pointed  remarks  about  "the  madness  ()f  inordinate  busi 
ffeSS  scheming"  by  men  handling  trust  funds.  He  closes  by  saving:  "W< 
Can  better  afford  to  slacken  our  pace  than  to  abandon  onr  old  simple  American 
standards  of  honesty,  and  we  shall  be  safer  if  we  regain  our  old  habit  of  look 
lug  at  the  appropriation  to  personal  uses.  0f  property  and  int. rests  held  in 
trust,  in  the  -one  light  as  other  forms  of  stealing." 

Stealing  is  a  crude,  coarse  word,  which  will  shock  some  modern  financiers, 

but  his  use  of  the  term  shows  that  Mr.  Cleveland  has  .-,  Iiv,|\  sense  of  the 
needs    of    the    situation.       That    trusteeship,    he    wants    it    understood,    will    be    no 

sinecure  while  he  holds  it.  There  will  be  no  dummy  directors  and  no  specu 
lative  deals  if  he  knows  it.  and  he  thinks  he  will  know  it.  In  short,  as  a  trustei 
he   promises   to  be  as  active  as  the  controlling  spirits  ,,f  the   Equitable  could 

wish,  and    maybe   a    little   more   BO. 

It  is  this  sort  of  a  jpirit  that   wrices  the  hope  of  the  nation  to  eliminate  the 


M)4  GRAFT    IN    AMERICAN    CITIES. 

poison  of  graft  thai  has  been  permeating  the  entire  national  life.  Every  man 
is  a  trustee  for  himself  and  his  neighbors  to  some  degree,  and  only  by  the 
realization  oi  each  honesl  man's  obligation  to  be  on  guard  and  alert  to  proteel 
the  right  even  when  he  is  not  himself  immediately  and  personally  concerned, 
can  we  teach  the  highest   point  of  national  vigor,  honesty  and  success. 


CHAPTER    XXXVU 

THE  GRAFTER    IN    BUSINESS. 

Private  and  Public  draft   Work  m  Close  Partnership— Business  Men  as  Hood 
Vers-    Juggling    With   Life  and  Safety     The   Labor  Boss  and  tin    Capital 

Boss      Strikes      and      Strike      Settlements      for      Side      Higher      Standard:. 
A  ,  eded. 

It  ls  hardly  worth  while  to  speculate  as  bo  whether  the  widespread  exten 
sion  of  systematic  graft  in  the  political  world  and  in  city,  state  and  national 
affairs,  has  stimulated  the  growth  of  the  same  method  of  theft,  petty  and 
otherwise,  in  private  affairs,  or  has  been  an  outgrowth  of  what  might  be  termed 
private  graft.  However  that  may  be,  it  is  certain  thai  of  late  years  the  two 
systems  have  grown  up  side  by  side,  with  little  l«»  choose  between  them  as  to 
the  energy  with  which  they  ply  their  nefarious  trade. 

Graft    in    business    begins    with    the    pettj    practices   of   the   dishonest    pur 
chasing  agent   who  draws  commissions  from  dealers  upon  all  the  things  he  hu} 
for   hi--  employer,  thereby   profiting  the  more,  Hie  higher  prices  he   pays,  and 
the  greater  the  consumption  of  materials.     This  is  in  no  \\a\   different   in  mor 
als,   though    ii    max    he  different    in   law,   from   the  disreputable   practices   that 
were  unearthed   in  the  United  States   Postoffice  Department   onh    u  year  or  two 
ago,  when  it  was  found  that   the  most   trusted  of  the  officials  were  the  worst  of 
tin    plunderer-,  and  some  of  them  were  sent   to  the  penitentiary    lor  their  mis 
deeds. 

Even  before  that,  we   had  seen  the  astonishing  spectacle  of  a   trusted   official 
.sent  to  Cuba  to  organize  tin    postoffice  of  the  young  republic,  where  the  oh! 
tion   was  upon   him  to  In    exemplan    to  the  highest   degree,  violating  hi-  trust 
and  abusing  the  confidence  of  Americans  and  Cubans  alike.     With  these  exam 
pics    before   us   we  do   not    need   to  he  surprised   when   we  find   the  same  th 
going  on    in   a   smaller   way,   because   the  opportunities  an-   smaller,   in   man) 
other  qua  ii  ers. 

It    is  difficult    lo  differentiate  sometimes  between    private  and    public  graft, 
and  often  one  part)    to  the  offen  e  i    in  public  service  while  the  other  is  in  pri 

x  air  ho  in.  I !    nupli     of  tlii      ..ii    ii  in  iln    manipulat  ion  of  i 

when   professional  "tax-fixers"  l>\    virtue  of  son*    strength,  necessarily    illej 


1 1 it;  THE   GR  iFTER    IN    BUSINESS. 

mate,  obtain  a  reduction  of  assessments  for  their  patrons,  of  course  al  a  price. 
Building  and  fire-escape  inspectors  wink  at  violations  of  the  law  for  a  bribe, 
waiving  safety  appliances  that  maj  cost  a  multitude  of  lives  by  their  absence. 
Hut  the  manufacturer  who  puts  iron  filings  into  life-preservers  because  iron 
i>  cheaper  than  cork,  as  was  sadly  proven  in  the  burning  of  the  "General  Slo 
cum,"  is  no  better  ami  no  worse  than  the  inspector  who  passes  then)  and  shares 
the  profits. 

The  mental  attitude  of  some  of  our  "best  citizens"  on  these  and  kindred 
points  i-  sometimes  a  surprising  one.  They  are  often  quite  unable  to  see  that 
tile  man  who  gives  a  bribe  is  as  bad  as  the  man  who  takes  it,  even  if  the  giver 
is  literally  laid  up  to  pay  for  :i  legitimate  object.  The  w  liter  lias  in  mind  the 
position  taken  by  one  business  man  who  is  prominent  in  mercantile  and  manu- 
facturing circles  in  Chicago.  lb'  ueeded  a  switch  and  side-track  to  a  certain  fac- 
tory, in  a  place  where  such  conveniences  wire  proper,  and  recognized  as  neces- 
sities. An  ordinance  was  required  and  he  was  quite  prepared  to  pay  the  city's 
price'  for  the  permission,  whatever  that  might  be.  Hut  the  ordinance  was 
"hung  up"  in  committee,  week  after  week,  with  no  sio-n  that  it  would  ever  be 
reported.  Finally  the  fact  was  hinted  to  him  that  he  needed  to  sec  the  chair- 
man of  the  committee,  which  he  did,  receiving  the  information  that  compensa- 
tion to  the  city  was  unnecessary,  but  he  must  pay  the  price  for  putting  the  mat- 
ter through  the  council.  lie  did  this,  and  in  conversation  justified  himself  for 
doing  so  by  the  fact  that  his  request  was  a  legitimate  one,  his  need  imperative. 
the  delay  disastrous,  and  he  had  to  do  as  others  did.  To  the  suggestion  that  ho 
should  have  fought  the  matter  to  the  end  for  an  honest  solution,  he  answered 
that  he  could  not  afford  the  cost  in  time,  publicity,  enemies,  and  the  resulting 
troubles,  and  that  it  was  none  of  his  business  any  way.  Manifestly  just  as 
long  as  men  who  claim  to  be  worthy  citizens  take  that  attitude,  we  cannot 
i  sped  much  in  the  way  of  improvement  from  the  professional  boodlers  and 
grafters. 

It  js  a  stern  arraignment  of  the  American  '•business  man"  that  Mr.  Stef- 
fens  makes  jn  one  of  his  utterances.  After  dismissing  what  lie  terms  "the 
hypocritical  lie"  that  the  foreign  element  in  our  population  is  responsible  for 
our  erraft  and  corruption,  he  says:  "Another  conceit  of  our  egotism  is  that  which 
deplores  our  politics  and  lauds  our  business.  This  is  the  wail  of  the  typical 
American  citizen.  Now  the  typical  American  citizen  is  the  business  man.  The 
typical  business  man  i-  a  bad  citizen:  be  is  busy.  Tf  he  is  a  'bio-  business 
man'  and  very  busy,  he  does  not  neglect,  he  is  busy  with  politics,  oh,  very 
busy,    and    very    business-like,      T    found    him    buying   boodlers    in    St.   Louis, 


THE   GRAFTER    IX   BUSINESS.  407 

defending  grafters  in  Minneapolis,  originating  corruption  in  Pittsburg, 
sharing  with  bosses  in  Philadelphia,  deploring  reform  in  Chicago,  and  beating 
good  government  with  corruption  funds  in  New  York.     He  is  a  self-respecting 

fraud,  thi>  big  business  man.  He  is  the  chief  source  of  corruption,  and  it  were 
a  boon  if  he  would  neglect  politics.  But  he  is  not  the  business  man  that 
neglects  politics:  that  worthy  is  the  good  citizen,  the  typical  business  man. 
He  is  too  busy,  he  is  the  one  that  has  no  use  and  therefore  no  time  for  polities. 
When  his  neglect  has  permitted  bad  government  to  go  so  far  that  he  can  be 
stirred  to  action,  he  is  unhappy  and  he  looks  around  for  a  cure  that  shall  be 
quick,  SO  that  he  may  hurry  hack  to  the  shop.  There  is  hardly  an  office  from 
United  States  Senator  down  to  alderman  to  which  the  business  man  has  not 
been  elected,  yet  politics  remains  corrupt.  The  business  man  has  failed  in  poli 
tics." 

Again,  after  relating  the  story  of  the  regeneration  of  the  city  council  of 
Chicago,  where  important  reforms  to  honesty  were  accomplished  and  are  not 
yet  appreciated  throughout  the  country.  Mr.  Steffens  says:  "How  do  the  'big 
business  men'  like  it  in  Chicago?  They  don't  like  it  at  all.  I  spent  one  whole 
ton  noon  calling  on  the  presidents  of  hanks,  great  husines>  men,  and  financiers 
interested  in  great  public  utility  companies.  With  all  the  evidence  I  had  in 
other  places  that  these  men  are  the  chief  sources  of  corruption,  I  \\;is  unpre 
pared  for  the  sensation  of  that  day.  These  financial  leaders  of  Chicago  wen 
'mad.'  All  hut  one  of  them  became  so  enraged  as  they  talked  thai  they  could 
iot  behave  decently.  They  rose  up  and  cursed  reform.  They  said  it  had  hurt 
business,    it    had    hurl    tin     town.       'Anarchy,'    they    Called    it:    'socialism.'      Thev 

offered  me  facts  and  figures  to  prove  that  the  city  was  damaged.  'Hut  isn't 
tin  reform  council  honest.-'  I  asked.  'Honest!  Yes,  hut  h  '*  'And  do  you 
realize  thai  all  you  sai  means  that  you  regrel  the  passing  of  hoodie  and  would 
pilfer  to  have  back  the  old  corrupt  council''  Thai  brought  .1  curse  of  i 
shrewd  smile,  or  a  comical  laugh,  but  th.it  tiny  regretted  the  passing  of  the 
old  boodle  regime  i-  tin  fact,  bitter,  astonishing  hut  natural  enough.  Wi 
liavi  Been  those  interests  at  their  bribery  in  Philadelphia  and  St.  Louis;  \v<- 
have  -'Mi  them  opposing  reforms  in  every  city.  Here  in  Chicago  we  have 
them  cursing  reform  triumphant,  for,  though  reform  may  have  been  a  benefit 
to  the  cit\  a-  a  community  of  freemen,  it  1-  r«all\  bad;  it  has  hurt  their  busi- 
ness !" 

It  fa  the  -oil  of  -in  influence  the  tremendous  growth  of  pji  ift  in  politic 
and  iii  business,  with  the  resulting  callousness  upon  ih>  eon  cienci  ol  Hie  mul 
titudes  who  participate  in  it.  that  is  manifesting  itself  afresh  in  other  field*  of 


W8  THE    GRAFTER    l\    BUSINESS. 

endeavor.  Employer  and  employee  alike,  in  varying  degree,  musl  share  the 
responsibility  for  the  shocking  things  thai  are  alleged  and  developed  as  to 
graft  in  the  industrial  world.  The  lionesl  workman  cannot  shift  to  his  busi 
ness  agent  or  walking  delegate  all  the  blame  for  the  corruption  that  creeps 
into  the  union  movement,  anj  more  than  tin  honest  business  man  can  escape 
hi-  share  of  guilt    in  the  lawless  methods  that  may  hi'  used  by  the  lawyers  or 

its  employed  by  his  association  and  paid  from  the  treasury  to  which  he 
contributes. 

It  is  no  part  of  the  writer's  duty  to  strike  a  balance  here  between  employer 
and  employee,  or  to  determine  where  the  greater  blame  lies  for  the  evils  that 
an-  perpetuated  in  the  war  between  capital  and  labor,  in  which  the  public  in 
the  mas-,  always  is  I  he  sufferer,  and  always  in  the  end  pays  the  hills.  Every 
candid  man  knows  that  there  is  enough  of  blame  on  either  side,  and  merit  at 
times  in  the  contentions  of  both  parties  to  the  conflicts.  Ali  we  can  do  here  is 
in  relate  some  of  the  phases  of  the  conflict  in  which  the  characteristic  American 
evil  of  graft  has  played  a  part. 

The  peculiar  power  placed  in  the  hands  of  the  trusted  business  agent  of  a 
union  and  the  manager  of  an  employers'  association,  with  the  obligation  they 
seem  to  fee]  to  win  every  contention  at  all  hazards,  has  stimulated  and  made 
possible  much  in  the  way  of  improper  manipulation  of  the  money  and  the 
authority  of  command.  The  organizations  have  been  less  curious  about  the 
methods  employed  and  the  disposition  of  the  money  expended,  than  they  have 
about  the  results  obtained.  As  a  natural  consequence  of  the  application  of  tin 
ild  phrase,  "You  must  fight  the  devil  with  (ire,"  there  has  been  a  tendency  on 
each  side  to  use  lawless  and  extreme  methods  to  accomplish  the  ends  sought. 
In  earlier  pages  we  have  written  at  length  of  the  crimes  of  capital  and  the 
crimes  of  labor.  Hut  it  would  be  impossible  to  relate  all  the  details  of  the 
charges  that  are  bandied  back  and  forth  between  the  opposing  forces,  or  to 
follow  into  all  its  branches  the  slimy  trail  of  graft  that  can  be  traced  across 
tie   whole   hi-torv   of   recent    conflicts. 

We  do  not  nerd  to  on  back  to  the  ctsc  of  the  notorious  Sam  Parks  of  New 
York  to  find  an  example,  though  he  has  been  ;i  conspicuous  figure  in  the  list. 
characterized  as  he  u;(>  by  courage,  recklessness  and  greed.  During  the 
spring  and  summer  of  1905  the  teamsters*  strike  in  Chicago,  with  its  attendant 
difficulties,  disorders,  negotiations  and  investigations,  brought  out  evidences  of 
plot  and  counterplot  which  showed  the  blight  of  graft  :il  every  hand.  Upon 
one  side  tin  charge  was  made  categorically  by  certain  labor  leaders  that 
employers   had   offered    large    sums   as   bribes   to   induce   the  calling  of  strikes 


THE   GRAFTER    IN   BUSINESS.  40«J 

against  their  competitors  in  business.  This  was  made  with  special  regard  to 
one  Large  mail-order  house,  the  claim  being  that  the  management  had  offered 
the  sum  of  $10,000  to  the  union  leaders  and  the  strike  fund  it'  a  strike  would 
be  declared  against  the  most  conspicuous  rival  in  the  same  business.  Of 
course  the  charge  was  denied  and  indeed  indictments  for  criminal  libel  were 
returned  against  the  ones  who  voiced  them,  hut  in  various  ways  they  have 
been  reiterated  against  others.  Again,  it  was  charged  in  detail  by  Labor  had 
ers  and  others,  that  the  great  strike  of  coal  teamsters  against  the  huge  office 
buildings  of  Chicago,  by  which  the  latter  were  forced  to  abandon  the  use  of 
natural  gas  for  fuel,  and  take  coal  instead,  was  inspired  and  paid  for  by  the 
most    prominent    coal    dealers   of   the   city    for   their  own    profit. 

On  the  other  side,  it  is  alleged  with  equal  defmiteness  that  some  of  the 
labor  Leaders  have  offered  strikes  for  sale  as  a  virtual  business,  or  have  agreed 
to  avert  strikes  for  money  paid  to  themselves,  or  have  called  oil'  the  strikes 
when  paid  to  do  so,  irrespective  of  the  merits  of  the  cause  or  the  Interests  of 
the  unions  they  were  purporting  to  serve.  Money  lias  been  spent  lavishly  in 
private  dissipation  by  some  of  the  more  reckless  labor  leaders,  and  tlie  onl\ 
source  from  which  it  could  come  is  the  treasury  of  the  unions  or  graft  from 
employers. 

The    most    conspicuous    charges    centered    around    the    name    of   one    John    C. 

Driscoll,  not  a  labor  leader,  but  a  "commissioner"  who  dealt  with  unions  as  a 
representative  of  employers.  lie  testified  before  the  Grand  Jur}  in  the  Chi 
cago  Investigations,  in  a  way  to  throw  much  light  on  the  subject.  In  his  da} 
of  Influence  he  seems  to  have  acted  on  the  broad  general  principle  that  indus 
Lriai  peace  had  a  cash  value  to  employers  of  labor.  Whenever  a  client  of  hi 
was  threatened  with  a  strike,  he  undertook  to  smooth  awa}  the  difficult}  if  pro 
vided  with  tin    necessary  funds,  and  he  applied  the  funds  where  he  though!  the} 

would  do  the  most    g I.     Ordinarily   he   prevented   b   strike,  according  to  In 

own  story.  Equall}  satisfactory  results  were  produced,  he  says,  when  there  was 
;i  strike  to  he  broughl  to  an  end.  According  to  Driscoll  his  methods  hav( 
resulted  in  peaci    on  hundred-,  of  occasions. 

There  are  employers  who  defend  such  actions.     The}   agree  with   Driscoll 

that    if    labor    Leaden   of   a    certain    sort    need    to   be    placated,    it     is    the    business    of 

the    expert      e|||pln\e,|     |'(ir     ||,at      purpose     In    establish    a     flie|ldl\      II  lldelsl  a  I  id  I II  g    al 

the    lowesl    market    rale.        \s    In    I  h.     method*    employed    HlO    man    who    di.iu      th 

check  i-  studiously   incurious.     He  gets  whal  hi    pa}     foi   and  asks  no  i]u<   lion 
.lu-l  as  he  has  a  lawyer  to  look  after  his  interests  In  court,  he  ha*  an  ngcnl   Lo 
fix  up  his  labor  troubles,     Strikes  are   innoying    md  costly,     lb    prefers  no!   to 


Hit  THE   GRAFTER    IS    BUSINESS. 

tin  in.  or  al  leasl  to  get  them  settled  as  quickly  as  possible  with  the  aid  of 
s  tg«  nt  and  his  check  book. 
Thai  is  the  immoral  \\a_\.  The  employer  lias  no  right  to  disavow  responsi- 
bility for  the  methods  of  hi>  agents.  To  assume  thai  trades  union  Leaders  are 
corrupt,  and  to  buy  them  off,  is  to  bring  corrupt  men  to  the  front  in  unions. 
Clearly  it  is  to  the  interest  of  an  honesl  employer  to  deal  with  honest  men 
when  questions  relating  to  his  working  force  are  to  be  considered.  He  has  no 
righi  to  pay  blackmail  or  tribute  of  any  sort  to  keep  from  meeting  an  issue, 
even  though  that  issue  he  raised  for  a  dishonest  purpose.  Until  this  attitude  is 
taken  and  maintained,  we  cannot  bring  graft  in  the  labor  world  to  an  end.  It 
i  equally  imperative  that  the  honest  Labor  union  men  disavow  and  eliminate 
from  their  rank-  the  men  who  use  or  accept  bribery  and  graft,  even  for  the 
apparent  profit  of  the  unions.  Sam  Parks  went  to  the  penitentiary,  after  a 
career  that  involved  grafting  upon  the  labor  unions  whom  he  represented,  and 
the  employers  who  were  equally  his  clients,  as  it  afterwards  developed.  Hun- 
dreds of  thousands  of  dollars  were  won  and  lost  in  the  graft  practices  that 
obtained  under  hi>  regime,  and  he  was  the  largest  sharer  in  the  plunder.  And 
vet  he  was  tolerated  and  even  upheld  throughout  the  unions  he  pretended  to 
•(  n  e. 

In  the  last  analysis,  the  American  public,  of  all  ranks  in  life  and  Labor, 
will  surely  revolt  against  these  nefarious  practices  that  lower  the  whole  tone  of 
honesty  and  decency.  It  is  in  exposures,  publicity  and  education  to  a  higher 
standard  of  integrity,  that  we  see  hope  for  the  future. 


CHAPTER    XXXVI II 


WHAT  ARE  VOL'  GOING  TO  DO  AHOIT  IT? 


Plutocratic  Impudence—  Education  must  be  tin'  Foundation  to  the  Solution 
of  Present  Day  Evils — Broadening  of  Governmental  Power  Publicity  tin 
Best  Cure  for  draft — The  Same  Brand  of  Honesty  Needed  for  Public  as 
for  Private  Life. 

A  generation  ago  "Boss"  Tweed, 
wIki  ruled  Tammany  Hall  and  New 
York  City  as  if  a  municipality  were 
nothing  hut  a  private  enterprise  for 
p<  rsqnal  exploitation  and  ^.ain,  when 
remonstrated  with  for  leading  the 
city  into  a  reign  of  boodh  such  as 
seldom  has  been  duplicated,  gave 
utterance  to  the  historic  phrasi  : 
"What  are  you  going  to  do  about 
it?"  Manifestly  thi^  was  a  piece  of 
effrontery  which  shocked  the  public. 
Hut.  crude  as  it  was  and  outspoken, 
it  depicted  the  type  of  business,  pol 
itical  and  social  unfairness  which  <\ 
isted  t  hen  and  b1  ill  exists,  even 
though  under  the  guise  <d'  philan- 
thropy and  uprightness.  When 
"Boss"  Croker  of  Tammany  Hail  in 
more    receni    history    definitely    sug 

ted    thai    everything    he   did    in    politics    was    for    the    benefit    of    his    own 

pocket,  and  al  the  same  time  expressed  a  lively  and  h< t  interesi  in  religion  to 

ihe    point    of   asking    the    renowned    orator    Bourke    Cockran    to   combai    the 
agnostic  teachings  of  the  late  Robert    Ingcrsoll,  there  seemed  to  be  an  incon 

tenc\    in  th<    man  which  few  observers  could  understand.     When  our  o\   the 
Vanderbilts,    piqued    into   an    unfortunate    remark    becau*  lal    train   on 

which  he  had   prided  himself  had   to  be  withdrawn  from  servio    through  lack 

11  I 


WILLIAM    M.     (•■BOSS")     TWEED, 
fath<  i    "i    polll  °   '"' 


ll:j  II  11.11    ARE    YOU  GOING  TO  !><>  ABOUT  ITf 

(i  patronage,  said,  "The  public  be  damned,"  he  expressed  something  of  this 
seemingly  Inexplicable  attitude  of  antagonistic  classes  in  modern  civilization. 
-in  these  varying  phases  of  impertinence  which  range  from  downright 
criminality  to  the  unfair  absence  of  a  consciousness  of  a  duty  to  be  performed, 
there  are  many  steps,  which  in  themselves  appeal-  insignificant,  but  which 
lead  definitely  toward  a  given  goal. 

When  Janas  J.  Hill  resented  the  attitude  of  President  Roosevelt  in  seeing 
that  the  anti-trust  law  against  combination  in  restraint  of  trade  was  carried  out, 
even  though  it  necessitated  the  dissolution  of  the  greatesl    railway  merger  ever 

•n.  and  viewed  the  railway  business  as  his  "own  business,"  the  distinction 
from  the  other  phases  of  unfairness  was  small.  Thesamething  held  true  of  the 
attitude  of  the  members  of  the  Beef  Trust  in  believing  it  within  their  province  to 
restrict  trade,  contrary  to  law  or  otherwise,  for  the  benefit  of  their  fast-swelling 
purses.  The  example  of  plutocratic  impudence  carried  out  to  its  logical  conclu- 
sion as  seen  in  the  history  of  the  Equitable  Life  Assurance  Society  probably  has 
no  equal  in  the  annals  of  so-called  legitimate  "high  finance,'"  though  we  find  rep- 
utable people  practically  calling  for  the  ostracism  of  the  men  who  attempted 
to  plunder  the  investing  public  through  the  scandalous  hut  "modern"  business 
method-  used  in  the  flotation  of  the  securities  of  the  Tinted  States  Shipbuilding 
( Company. 

In  many  directions  we  find  the  same  disease  eating  it-  way.     The  grafter  in 
Philadelphia   keep-  brazenly    at    his  work,  confronted  by  a  hundred  hangman's 
noose-,  and  only  desists   from  robbing  the  city,  not  only  of  its  wealth  bill    of   its 
name,   when   the  logical   force  of  Might — the  populace — insisted   upon   its 
light-.      Xo  greater  arrogance,  even   though   it  be  less  glossed   over  by  super- 
ficial  refinement,  exists  than   that   shown   by   many  of  the  leaders  of  organized 
labor.     Tin-  is  met   by  the  same  degree  of  stiff-neckedness  on  the  part  of  the, 
capitalistic   class   which    insist-   "this    i-    my    business."      Hut    this   class   cries  out 
in  horror  when  an  indignant  public  demands  to  know  how  a  Rockefeller  honestly 
can  accumulate  the  wealth  of  half  a  dozen  states  iii  a  lifetime.     The. employer 
and  those  who  justify  his  nut  hod-  deem  he  is  doing  humanity  a  great   service 
by  "giving  work"  to  wage-earners.    The  wage  earner  insists  upon   the  right  to 
!        i  mployer  cries  out  against  the  boycott  as  un-American,  forgetting 
that   tin     refusal    of  the    people   of   the    American   colonies    to   buy    products    from 
hip    of  the  mosl    effective  weapons  aside   from   bloodshed   used   to 
freedom   through   lln    War  of  the   Revolution.      And   while   tin-  trust    pro 
moter  and  "high  finance"  banker  "water"  stocks  so  copiously  that   the  term  has 
ne  synonymous  with  robbery;  while  stock  manipulation  goes  on  dishonestly 


WHAT  ARE   YOV  GOING  TO  DO  ABOUT  IT?  US 

in  Wall  street,  and  the  corporation  manager,  blinding  Ins  stockholders,  issues 
the  "official  denial"  which  is  tantamount  to  downright  falsehood,  the  labor 
leader  frequently  advocates  slugging,  often  selfishly  restricts  logical  progress 
and  carries  business  war  forward  constantly  in  such  endeavors  as  will  gain  .» 
temporary  victory,  a-  say,  in  the  resistance  of  the  policy  of  the  "open  shop." 
In  the  meantime  the  whole  land  trembles  and  cries  for  a  "square  deal." 

At  this  point  the  query,  "What  are  von  going  to  do  about  it  :**  comes  not 
from  the  impudent  malefactor  hut  from  one  and  another  of  the  \ast  majority, 
which  by  the  power  of  Might  make  their  edict  Right-  from  the  millions  of 
sober  minded  American-  who  by  right  of  birth  or  naturalization  have  vested  in 
them  the  power  to  declare  their  sovereign  will  operative  for  tin-  benefaction  of  all 
society.  Such  a  question,  perhaps,  is  the  natural  query  thai  springs  up  in  the 
mind  of  every  person,  who.  roused  by  the  cry  for  the  "square  deal."  seeks 
through  the  medium  of  this  hook  to  know  more  concerning  the  great  domestic 
problems  which  confront  the  nation  today.  Indeed,  the  problems  before  the 
American  people  for  solution  differ  hut  in  degree  from  those  which  are  before 
the  civilized  nation-  of  the  world. 

It    follow-  almost   without   saying  it   specifically  that   the  existence  of  a  de- 
mand for  such  a  hook  as  the  one  lure  presented  presupposes  a  somewhat  genera] 
admission  of  the  fad  thai  education  must  be  the  foundation  -tone  on  which  an\ 
schem<    of  solution  of  present-daj   evils  is  to  be  built.     If  the  reader  has  seen 
anything  of  evolution   in   the   foregoing  chapter-   there   musl    have  been   • 
than  a   hazy   suggestion   that    the  demand   for  knowledge  which  shall   work    for 
good  citizenship,  which  shall   result    in  good  character-building  and  enlighten 
ineiit  to  the  point  that  action  may  he  taken  logically   to  remedv  existing  evil 
abroad   in  ever}    part   of  the  Land.    Perhaps  those  into  whose  hands  this  vol 
will   fall  and  who  agree  with  this  assumption  believe  that    the  desire  for  know! 
idgc   i-   no  sooner  expressed   than   it    m.i\    be  gratified.    Several  obstacles,   ' 
ever,   interpose   to   prevent    as  definite   progress  in   this  direction  u  red. 

Poverty,  no  matter  what  may  be  the  cause,  is  one  of  these  difficulties,  and  al  the 
same  time   it    i-  one  of  the   ill-  which  through  education  wc  seek  to 
There  i-  one  school  of  philanthropists  which,  now    that    Ameri  leveloped 

a  type  of  it-  own  making  through  the  commingling  of  mosl  of  the  wl 
and   some  other  races,  seeks  to  prevenl    poverty    h\    restricting  imi 
certain   so-called   "undesirable"   people   from  other  countrii         '  the 

nation  already  limit   lhi>  immigration  to  a  considerable  d< 
inal.s,  diseased   persons,  contracl   laborers  and  several  other  '\i 
Vnother  school  of  sociologists  hold,  thai    while  criminal  01 


nt  WHAT  ARE   YOU  GOING  TO  DO  ABOUT  ITf 

should  be  kepi  from  the  country,  it  is  an  admission  of  faulty  Logic  when  the  sin 
of  poverty  can  be  stamped  out  only  by  such  preventive  methods.  And  closely 
nllied  to  these  thinkers  are  those  who  cry  out  upon  the  coincidence  of  congested 
tenements  and  palaces  of  the  millionaires  in  the  greal  cities  and  tin-  broad  acres 
of  the  rich  man's  country  estates  side  by  side  with  vast  unused  spaces  where  the 
poor  would  not  find  themselves  shelterless  so  long  as  they  had  the  free  use  of 
tlu  ir  limbs. 

Hut  in  the  plea  for  education  it  is  not  alone  the  impoverished  man  who 
must  he  leached,  for  it  is  not  always  this  class  that  is  most  ignorant  of  condi- 
tions which  must  he  understood  before  some  of  the  worst  evils  of  modern  society 
will  find  their  remedies.  Clearly  one  tiling  must  he  understood  concerning  the 
attitude  of  the  so-called  lower  classes.  There  is  an  influence  at.  work  apparently 
to  create  a  class  instinct  among  wage-earners,  if  that  instinct  dot's  not,  in  fact, 
already  exist.  This  instinct  does,  or  will,  work  for  whatever  will  be  either  of 
temporary  or  of  permanent  interest  to  the  wage-earner.  Up  to  this  point  it  has 
worked  principally  to  create  organizations  of  the  trade-union  type,  to  gain  any 
advantage  possible  for  members  of  the  union,  by  peace  methods  if  possible,  but 
by  war  methods  if  necessary.  Edwin  Markham  catches  this  spirit  of  the  wage- 
earner  in  his  poem  "The  Right  to  Labor  in  Joyr"  the  lines  of  which  we  print 
with  the  view  to  setting  forth  by  indirection  what  must  be  some  of  the  unfailing 
deinand>  of  the  wage-earner  upon  society: 

"Out  on  the  roads  they  have  gathered,  a  hundred  thousand  men, 
"To  n.sk  for  a  hold  on  life  as  .sure  as-  the  wolf's  hold  in  his  den, 
"Their  need  lies  elose  to  the  quick  of  life  as  the  earth  lies  close  to  tin- 
stone; 
"It  is  as  meat  to  the  slender  rib,  as  marrow  to  the  bone. 

"They  ash-  but  the  bare  to  labor,  to  toil  in  the  endless  night, 
"For  a  little  salt  to  savor  their  bread,  for  houses  water-tight, 
"Then   "*!''  but   fl'r  right   to  labor  and   to  live  by   the  strength   of   their 
hands — 

"They  who  have  bodies  like  knotted  oaks,  and  patience  like  sea-sands, 

"And  the  right  of  a  man  to  labor  and  his  right  to  labor  in  joy — 
"Not  all  your  laws  can  strangle  that  right,  nor  the  gates  of  hell  destroy. 
"For  if  came  with  the  making  of  man  and  was  kneaded  into  his  bones, 
"Ami  it  will  stand  tit  the  last  of  things  on  the  dust  of  crumbled  thrones." 


WHAT  ARE  YOU  GOING  TO  DO  ABOUT  IT?  U5 

In  many  quarters  one  hears  the  ready  assumption  that  "a  man  gets  about 
what  he  is  worth"  and  that  "evolution"  and  the  law  of  "survival  of  the  litt. 
will  take  care  of  the  fundamental  matter  of  labor  and  the  fruits  thereof.  It  is 
not  our  purpose  here  so  much  to  consider  tin-  ethics  of  the  problem  of  which 
poverty  is  one  of  the  principal  phases,  as  it  is  to  point  out  that  the  conditions 
that  develop  poverty  to  a  great  degree  are  working  definitely  as  a  tremendous 
force  in  its  solution  ami  in  answering  the  question  of  "What  are  you  going  to 
do  about  it?"  Granted  "undesirable"  Immigrants  come  to  this  country  from 
the  worst  classes  of  the  peoples  of  Europe.  Tin  causes  back  of  their  coming 
arc  manifold  and  will  have  to  be  removed  at  least  in  part  before  other  malcfac 
tors  can  hide  their  sins  under  the  cloak  of  this  evil.  In  the  first  place,  America 
is  the  "land  of  the  free."  In  the  next  place,  in  hundreds  of  thousands  of  cases 
immigrants  arc  tempted  to  conn-  to  this  country  by  wicked  misrepresentations  <•! 
people  who  will  be  benefited  by  their  coming — principally  employers  seeking 
labor  in  the  cheapest  market  and  constantly  using  dishonest  means  to  get  labor 
at    what   is  termed   the  "living   wage." 

Obviously,  however,  the  day  has  gone  when  the  wage-earner  i>  going  to  be 
content  with  simply  existing.  With  the  progress  of  the  world  in  ever}  direction 
it  should  lie  apparent  to  the  most  ignorant  multimillonaire  and  here  it  may 
he  said  that  as  concerns  the  desires  and  ambitions  of  the  poor  the  rich  are  the 
most  ignorant  that  no  Longer  will  a  bare  "living  wage"  suffice  I'm-  the  wag< 
earner.  If.  perchance,  the  workman  desires  college  educations  for  his  children 
and  Beethoven  music  for  himself,  nothing  short  <>f  this  can  constitute  the  modern 
"living  wage."  Undoubted!}  this  is  the  fundamental  impulse  that  now  is  <|. 
veloping  what  sonic  please  to  call  a  "class  consciousness"  among  those  who  do  the 
work  of  the  world.     It  is  this  surge  which  has  held  together  the  trade  union  as 

a  makeshift    toward  getting  better  conditions   for  labor  until  a  more  perfect    w.i\ 

can   be  evolved. 

With  this  somewhat  slow  awakening  to  needs  tor  a  higher  oil  of  existence 
than  that  of  dumb  brutes  and  meager  and  imperfect  mean-  lor  obtaining  them, 
there   has  come  another  awakening   which    the   present    dominant  nnot 

overlook.  This  is  the  awakening  to  tin  fact  that  wrong  has  been  committed  in 
high  places.  As  has  been  outlined  in  the  fori  going  chapt  rs,  a  wave  of  infidelity 
to  the  obligations  of  trust  has  swept  over  the  country.  There  appeals  ;,>  b. 
easy  set  of  business  morals  at  work  in  many  quarters  toda}  It  has  been  said 
truthfully  thai  "men  who  recognize  and  obej  the  highest  demands  of  honorable 
conduct  in  the  discharge  of  the  duties  of  a  trustee  under  a  will  or  i  rdian 

of  an  infant,  w  em  to  jet   up  a  different   standard  whi  n  w  n  ii  r  or 


H(i  WHAT  ARE   YOV  GOING  TO  DO  ABOVT  tT9 

ugenl  of  a  corporation."  In  feudal  Europe  there  were  two  principles  at  work 
to  keep  the  demands  of  the  populace  in  check:  "the  king  can  do  no  wrong"  and 
••1  rule  l>\  Divine  right."  It  has  been  said  thai  while  these  have  given  way 
long  since,  they  have  given  way  to  ne^  principles  which  run  something  in  this 
fashion,  "the  kings  of  industry  ran  do  uo  wrong"  and  "we  rule  by  divine  righl 
of  high  finance."  People  do  not  like  the  idea  of  a  self-perpetuating,  irrespon 
sible  monarch  in  business  any  more  than  they  like  the  absolute  monarch  in  gov- 
ernment The  eighteenth  century  saw  the  movement  for  freedom  from  political 
despotism  and  tins  twentieth  century  is  witnessing  the  movement  for  freedom 
from  financial  despotism.  And  when  we  find  the  wage  worker  In  lit  upon  a  higher 
scale  of  life  and  crying  out  upon  the  faithlessness  to  trust  in  high  places  we 
find  potent  instruments  for  furthering  the  evolution  which  we  are  witnessing. 

Thus  far  education  has  been  reciprocal  and  all  present  signs  point  to  a  con- 
tinuation of  this  tendency.  In  days  of  feudalism  the  educative  forces  of  civiliza- 
tion were  dominated  by  the  overlords  who  retained  the  educators.  Concessions 
from  existing  conditions  to  the  underclass  came  slowly  and  education  wrote  into 
the  ethics  of  the  ruling  class  new  doctrines  of  liberty  generally  only  after  liberty- 
had  been  achieved.  Today  it  is  quite  patent  that  the  dominating  class,  the.  cap- 
italist, works  through  education  as  well  as  through  social,  business  and  legal 
influences.  This  being  true,  we  may  expect  to  see  ideas  favoring  anything 
beneficial  to  capitalism  as  the  dominant  system  of  economics  working  constantly 
in  law.  in  education,  in  morals,  in  general  business.  Because  of  this  we  find  more 
and  more  the  dollar  the  goal  of  all  ambitions.  In  the  question  of  this  goal  we 
find  many  people  who  do  not  use  the  rules  of  the  game  of  present-day  competi- 
tion. In  fact,  as  pointed  out  heretofore,  we  find  the  motto  in  many  business 
quarters  to  he  "business  is  war.'*  Naturally  here  arises  the  question  as  to  what 
can  be  secured  by  .ducat ion  at  this  juncture. 

Briefly  put  education  must  raise  the  genera]  level  of  humanity  to  a  consid- 
erable degree,  hut  in  current  events  it  appears  to  he  disclosing  to  the  lower  order 
of  intelligence  the  questionable  methods  employed  by  the  dominant  class  to  gel 
whatever  of  the  good  things  of  this  earth  are  available  to  .Might.  Thus,  while 
the  wage-earner  i-  confronted  with  the  goal  of  his  employer,  he  is  also  tempted  to 
use  the  mean-  his  employer  has  used  to  attain  that  goal.  Before  education,  there- 
fore, i~  to  work  a  good  influence  on  the  lower  classes,  it  is  barely  possible 
that  the  dominant  class  must  learn  square  dealing. 

But  ;it  once  the  disciple  of  educative  methods  for  relieving  social  ills  is  con- 
fronted with  fact  that  even  legal  methods  can  he  used  to  benefit  the  more  power- 
ful  c];i-.      When   the  strongest  party  desires  certain   legislation  it  can  legally 


WHAT  ARE  VOL'  GOING  TO  DO  ABOUT  IT?  n' 

secure  that  legislation  by  force  of  controlling  public  opinion.  Therefore  the 
class  instinct  in  the  wage-earning  class  finds  it  to  the  interest  of  this  class  to 
work  through  kgal  means  to  secure  every  possible  advantage  over  the  capitalist 
class.  Obviously,  education  among  the  wage-earners  is  developing  to  a  know! 
edge  of  how  to  use  the  right  to  vote  to  the  best  advantage.  Today  as  never 
before  there  is  a  spirit  abroad  among  the  wage-earners  to  awake  to  the  natural 
power  placed  within  the  reach  of  all  Americans  to  create,  by  means  of  the  elect- 
oral franchise,  conditions  which  will   favor  them   instead  of  the  employing  class. 

Here  we  find  up  to  the  present  time  the  existence  of  the  idea  that  the  in- 
terests of  capital  and  labor  are  conflicting  rather  than  identical.  And  at  this 
point  it  is  perhaps  permissible  to  state  that  on  this  rock  many  schemes  for  im- 
proving existing  conditions  have  been  wrecked.  Naturally  it  is  to  the  advantage 
of  the  capitalist  da--  to  educate  the  w -age-earner  to  view  the  prescnl  system  of 
distribution  of  wealth  as  the  only  feasible  one.  Hut  the  wage-earners,  and 
many  others  for  that  matter,  express  grave  doubts  over  the  stability  of  the 
capitalistic  system  of  uealth  distribution.  Therefore  we  find  educative  forces 
among  the  wage  earners  working  to  build  up  a  sentiment  to  destroy  this  system 
and  place  in  its  stead  one  which  will  not  permit  of  such  glaring  inequalities  as 
exist  between  the  capitalists  and  the  wage-earners  today.  Apparently  this  results 
in  working  in  a  circle  and  haves  class  antagonism  where  it  started,  bent  upon 
the  mastery  of  the  situation  by  the  most  powerful.  And  to  some  degree  this 
assumption  is  based  upon  known  tendencies.  It  capital  is  being  educated  to 
consider  the  needs  of  tin  poor  m  order  l<>  set  a  better  example  to  tin  wag< 
earner,  the  working  class  is  being  educated  to  the  power  of  the  ballot.  For 
there  is  no  douht  that  the  wage-earners  are  in  the  majority  and  that  therefor 
they  can  legally  declare  Might  to  he  Right  and  vote  to  make  even  as  sweeping 
changes  in  existing  conditions  as  the  confiscation  of  public  utilities  and  other 
tool-  of  production  and  thereby  displace  tin  present  system  of  capital  domino 
tion  by  community  owner-hip. 

This,  indeed,  i-  being  accomplished  in  som<  measure  by  municipal  ownership 
in  many  cities  of  Europe  and  Bom<  cities  in  this  country.  Man}  i  town  own-  its 
water  and  light  plants,  -mall  pari-  ami  neighborhood  settlement  houses,  and 
some  of  t hem  operate  street  railway  jystems.  What  we  ?eck  to  learn  from  these 
di  velopments  i-  to  ascertain  to  what  extent  this  ph  icial  life  is  a  criterion 

of  the   future   functions  of  government.      In   the   foregoing  chnptcrs   what    lm 
In  en   the  dominant    note   -truck   l>\    history    itself?      In  Hie  cases  of  tin    w 

tion  of  th.   Beef  Trust,  the  Standard  oil  Trust,  the  Life  I.  Trust,  of  the 

prosecution  of  grafters  and  of  the  intcrfcrcno    between  employer  and  employe 


us  it  HAT  ARE   YOV  GOING  TO  DO  ABOUT  ITf 

in  the  clash  of  conflict  wc  find  definitely  a  tendency  for  government  in  some 
t'orm  to  interpose  its  influence.  We  find  many  laws  in  existence  to  prevent 
combinations  in  restraint  of  trade,  laws  against  trusts  and  monoplies,  when 
actually  there  are  great  savings  in  the  methods  used  by  the  trusts  and  monopolies. 
Win  is  this?  Emphatically  because  the  lawmakers  of  the  country  fear  that 
people  will  not  lie  fair  enough  to  each  in  the  quest  for  dollars  to  be  left  to 
themselves  in  charge  of  great    power  without   the  restraining  hand  of  the  law. 

This  brings  as  to  the  conclusion  that,  whatever  is  to  he  the  ultimate  future 
of  s(H-ial  conditions,  government  regulation  is  to  play  an  important  part  for 
some  time  to  come.  By  this  we  mean  the  supervision  of  governmental  forces  over 
the  business  of  the  country.  There  are  those  who  believe  this  will  be  but  a 
makeshift  in  the  course  of  evolution,  that  the  eventual  trend  is  for  government 
to  assume  any  and  all  duties  that  will  make  for  the  happiness  of  all.  Specifically 
it  is  pointed  out  that  in  an  industrial  millennium  equal  opportunities  will  offer 
for  every  person  to  achieve  easy  conditions  of  life.  But  in  the  meantime,  for 
instance,  while  strife  between  capital  and  labor  goes  on,  it  seems  quite  likely 
that  tin'  suffering  public  will  demand  such  government  intervention  as  will 
go  to  the  point  of  forcing  contending  interests  to  arbitrate  their  difficulties, 
regardless  of  the  plea  of  one  side  that  "there  is  nothing  to  arbitrate." 

Briefly,  therefore,  it  may  he  said  in  answer  to  those  who  ask  "What  are 
you  going  to  do  about  it?"  that  the  question  is  being  answered  daily  through 
actual  progress,  although  that  progress  may  be  slow.  In  the  first  place  we 
find  the  general  weal  calling  for  education  in  order  to  handle  perplexing  prob- 
lems  with  something  of  sanity.  Then  we  find  that  although  there  is  a  class 
war  between  capitalist  and  wage-earner  the  public  calls  for  the  use  of  the  ballot 
instead  of  the  shock  of  physical  combat.  And,  furthermore,  wc  find  a  definite 
tendency  for  the  public  to  lean  so  strongly  toward  governmental  regulation  of 
monopolies  and  other  powerful  combinations  that  government  ownership  is  ad- 
vocated and  adopted  in  many  quarters. 

Now  the  obstacle  that  confronts  the  advocate  of  a  general  advance  toward 
such  a  community  ownership  as  is  suggested  by  Socialists  comes  from  the  dread 
of  graft  among  the  politicians.  Those  who  are  combatting  the  socialistic  tend- 
ency use  the  argument  that  as  a  people  we  are  not  fit  to  govern  ourselves  to  the 
point  of  owning  and  operating  all  utilities,  lest  graft  creep  in  and  debauch 
the  country.  Doubtless  the  examples  of  graft  today  have  made  this  fear  seem 
based  on  something  definite  and  lasting.  But  at  this  point  publicity,  which  is 
the  accepted  cure  for  temporary  ills,  is  advanced  as  the  preventive  of  grave 
abuses   in  a  more  ideal   community.     Whatever  the  tendency  toward  this   ideal 


WHAT  ARE   YOU  GOI&G  TO  DO  ABOUT  JJ'r  419 

may  be,  it  is  evident  that  the  bulwark  of  democracy  today  is  publicity.  For 
one  thing,  the  public  as  a  whole  is  too  honest  to  countenance  graft,  "high  finance" 
robbery  or  arrogance  in  bribing  employer  or  slugging  labor  leader  if  the  facts 
are  laid  bare.  Corruption  cannot  bear  the  light  of  publicity  any  ...ore  than 
darkness  can  withstand  the  rays  of  the  sun.  Self-interest  will  not  permit  of 
general  wrong.  This  corruptionists  have  s,.t„  long  since,  and  as  a  result  the". 
have  bought  up  newspapers  and  other  means  of  publicity  either  to  gtifle  the  cry 
for  the  "square  deal*'  or  to  start  a  counter-cry  which  will  drown  the  honest 
complaint.  Venality  exists  with  the  press  ;ls  everywhere  else.  Hut  eventually  .t 
becomes  known. 

'Dure  are  times  when  publicity  is  hard  for  misfortunate  or  dishonest  people 
or  corporations.  The  stock  company  which  is  thriving  finds  publicitj  easj  ;  .1  is 
when  the  company  runs  upon  hard  times  and  financial  statements  riio*  up  poorly 
that  the  rub  comes.  As  President  Wilson  of  Princeton  Universitj  says  of  the 
corporation  manager:  "If  we  are  t„  give  them  our  money  we  must  at  least  troubh 
them  to  let  us  see  their  consciences."  The  Rockefellers  and  Havemeyers  who 
view  publicity  as  a  si„  against  -big  business"  ask  the  public  to  trust  the  corpor- 
ate manager  while  such  rottenness  creeps  into  high  finance  as  i,,  the  case  of  the 
Equitable  Life  scandal.  John  E.  Parsons,  counsel  for  the  Sugar  Trust,  says: 
"Give  me  a  body  of  honest  men  who  are  perfectly  trustworthy,  and  I  would  be 
willing  to  invest  money  with  them  without  going  very  deeply  or  minutelj   into 

prospectuses  or  reports."     Of  course  honesty  and  probity  are  the  st  essential 

things  in  corporate  management  as  ;„  private  life.  -If  all  men  were  absolutely 
honest  as  well  as  able,"  says  the  Wall  Street  Journal;  -if  all  directors  felt  theii 
responsibility  as  trusters  0f  other  people's  num.  \  as  keenlj  as  they  appreciate 
their  own  opportunities  for  personal  gain,  then  it  might  be  said  there  was  no 
"",l  for  publicity."  But  publicity  is  necessarj  to  enable  people  to  know  thi 
character  of  the  men  directing  corporation  affairs.  Character  of  course  i 
sential,  but  we  cannot  know  tl„  character  of  a  corporation  which  hid.,  behind 
the  \«il  of  mysterj  and  does  not  disclose  its  affairs,  good  or  bad,  ^.n  to  it, 
stock  holders. 

Following  close  in  this  line  of  thinking,  we  find  certain  statesmen  advo 
eating  federal  licenses  for  the  interstat*  corporation,  as  suggested  bj  Com 
mission,,-  Garfield.     I.,  this  line  Judge  Peter  -    I  up  of  the  CTnited  si 

Circuit  Court  expressed  his  news  in  McCluro's  Magazine  as  follows; 

"Let  me  preface  it  b\  saying  that  against  corporations,  aa  corporation  I 
have  no  enmity.  Modern  civilization  requires  that  capital  shall  be  wielded  in 
large    mass,,.      The   corporation    is   civilization's   method   of   wielding   capital 


i\!n  WHAT  ARE   YOU  GOING  TO  IX)  ABOUT  ITf 

m  large  masses.  On  that  account  the  corporation  is  here  to  stay.  The  only 
institution  in  sight  to  supplant  it  is  stair  socialism;  and  state  socialism  is 
iv\  olution    accomplished 

"Hut  tlu-  fundamental  basis  i){'  the  corporation  is  the  institution  of  private 
property  and  the  guaranties  our  government  gives  to  private  property.  Now, 
it  so  happens  that  the  fundamental  basis  of  the  thing  I  have  culled  measur- 
able individual  independence,  and  the  opportunity  to  measurably  exercise 
individual  dominion,  is  also  this  institution  of  private  property. 

"It  was  the  institution  of  private  property  that,  more  than  any  other  secu- 
lar agency,  brought  us  to  civilization;  and  on  this  institution,  as  on  a  rock, 
the  civilization  of  the  world,  and  the  world's  republican  institutions,  must  con- 
tinue to  rest. 

"Now,  it  is  just  this  institution  of  private  property  that  is  undergoing,  at 
this  time,  a  strain  never  put  on  it  before.  The  weight  producing  the  strain  is 
the  corporation.  Not  because  the  corporation,  in  essence,  is  retrogressive  and 
unrepublican.  but  because,  in  fact,  it  is  unrepublican,  and  for  that  reason  re- 
trogressive  also.  Not  because  the  corporation  is  big  and  growing  bigger;  but, 
because,  in  all  this  growth  of  superstructure,  the  base  is  narrowing — the  pro- 
prietorship of  the  private  property  of  the  country,  by  the  bulk  of  the  people 
of  the  country,   is  radically   narrowing.- 

"Thus  coroporate  dominion  has,  within  thirty  years,  beginning  with  almost 
nothing,  outstripped  agricultural  ownership  by  more  than  three  billions  of 
dollars;  and.  barring  city  real  estate,  comprises  now  nearly  one-half  of  the 
whole  wealth  of  the  country.  In  the  swing  of  the  industrial  system,  the 
corporation  has  come  to  be  the  gravitating  force  that  holds  the  activities  in 
their  orbiK.  I>  it  much  wonder  that,  in  the  eyes  of  those  who  look  upon  the 
Corporation  as  an  interloper,  it  has  come  to  be  regarded  as  a  ursurper  also — 
the  usurper  of  what  the  labor  of  individual  men  has  created;  or,  that  in  the 
of  tho^e  who,  with  clearer  vision,  look  upon  it  as  an  indispensable  phase 
of  industrial  evolution,  the  way  in  which  the  corporation  shall  hereafter  be 
organized,  and  the  bounds  given  to  its  dominion,  are  coming  to  be  the  para- 
mount   political    problems   of   our   time? 

"Nor.  viewed  purely  as  a  question  of  economics,  can  the  transformation 
be  ignored.  The  industrial  complaint  that  has  greatest  voice  today  is  the 
danger  of  monopoly.  Corporations  owned  widely  by  the  people  might,  per- 
haps, become  monopolies;  though  I  know  of  no  actual  instance  of  a  monopoly 
widely  owned.  But  the  antidote  of  monopoly  is  competition;  and  let  it  come 
about   that   corporations  be  made   reasonably   safe,  and  therefore  desirable   in- 


WHAT  ARE  YOU  GOING  TO  DO  ABOUT  II  421 

vestments— let  it  come  about  that  the  corporation  shall  no  longer  be  regarded 
as  a  mere  financial  sinkhole,  except  for  those  skilled  in  its  ways— and  there 
will  be  abundance  of  capital  at  hand,  as  the'  bank  deposits  show,  to  put  in  tin 
field  a  competitive  corporation,  whenever  in  that  field  monopoly  seems  to  ! 
established  itself.  Indeed,  the  chief  reason  why  any  monopoly  can  qow 
maintain  itself  is,  that  besides  having  a  grasp  on  all  the  physical  sources  of 
productivity  within  a  given  Held,  it  has  a  large  grasp,  also,  on  all  the  finan 
rial   resources  that   would  otherwise.  go  into  the  building  up  of  competitors. 

"But  the  transformation  strikes  deeper  than  mere  economic  conditions,  01 
the  natural  laws  that  govern  monopoly  and  competition.  The  transforma- 
tion of  the  ownership  of  a  country's  industrial  property,  from  its  people 
generally,  to  a  i'^w  of  its  people  only,  reaches  the  bed-rock  of  social  ahd 
moral  forces  on  which,  alone,  the  whole  structure  of  republican  institutions 
rests;  for,  under  such  conditions,  instead  of  depending,  each  on  himself  and 
ins  own  intelligence  chiefly  for  success,  the  greai  hulk  of  our  people.  Increas 
mgh-,  will  become  dependents  upon  others.  Those  who  possess  investible 
means  will  come  to  rely  solely  upon  the  greai  financial  institutions;  and 
those  who  possess  nothing  hut  capacity  for  labor,  upon  ih«  greai  organiza 
tions  of  labor.     Thai    is   paternalism   that    will   eventually   divide  the  country 

into    two    hostile    camps,    the    camp    of    those    who    have,   and    the   camp   of    those 
who  have   not:   tin    paternalism  that    speedily  descends  into  actual  state  social 
ism  or  a  dry-rotted  citizenship  as  nerveless  and  squalid  as  state  socialism. 

"The  firsl  step  in  the  solution  of  that  problem  is,  that  the  governnicnl 
obtain  a  full  grasp  of  tin  whole  subject  matter;  and  this,  in  m\  judgment, 
can  adequately   be  done  onlj    by   putting  aside   tin    five-and  forty   bewildering 

state   hands,   for  tin-  one   gnat    national   hand. 

"The    second    step,    the    step    for    which    the    first     i>    taken,    i-,    to    t .- 1 k .     can 

upon    what    kind   of    corporate    proposal   the   government's   great    seal    is  s,  i 
to   cut    out    the  stock-jobbing  corporation:   tin    water-logged   corporation;    th 

mere  vision  of  visionaries;  the  labyrinthian  corporation  whose  stock  and  bond 

is>ue>.  are  so  purposelv  tangled  thai   no  mind,  not  an  expert's,  can  follow  their 
inuosities.     In  short,  to  regenerate  the  corporation. 

"The   third    step   is   to  open    to   the   wage-earner  of  the  country    tin  road 

to  proprietorship.     The  basis  of  even    greai   nuccessfnl  enterprisi    i-  thi  com 

mand:     Go    forth,    increase,   and    multiply;   and    to    no   enter]  ht 
fully  be  denied  the  fruit-  of  thai  command.*1 

In  order  to  weigh  the  foregoing  statcmenl  in  the  jusl  be  tlern 
development  and  of  the  "squari    deal,"  it   must  Im     aid  it  cxpn 


4£g  WHAT  ARE  YOU  GOING  TO  DO  ABOUT  ITP 

Bests,  the  belief  of  an  exponent  of  the  capitalist  class,  the  ideas  of  a  believer 

in  private  property  to  the  exclusion  of  any  other  form  of  property  owner- 
ship. It  is  not  our  purpose  here  to  pass  final  judgment  on  what  Judge 
Grosscup  decries  as  paternalism.  The  one  great  question  before  the  Amcri- 
can  public  is.  what  will  give  the  majority  of  the  citizens  of  this  country  the 
most  happiness?  We  have  seen  that  private  exploitation  of  such  public 
functions  as  lite  insurance,  the  postal  service,  railway  lines  to  the  point  of  dis- 
crimination and  many  others  is  not  to  he  tolerated.  We  have  seen  that  logical 
m<»uth  of  business  constantly  tends  toward  monopoly  for  the  purpose  of 
economy.  Hut  we  have  also  heard  the  emphatic  denunciation  of  abuse  of  pri- 
vate ownership  of  monopolies.  1).  W.  Frederikscn,  a  well-known  student 
of  tin-  question  of  monopoly  and  trusts,  said  recently:  "Many  will  doubt 
whether  this  (government)  regulation  is  feasible,  and  will  say  prices  must 
be  regulated  by  supply  and  demand  and  not  by  law  or  by  the  courts.  Given 
FREE  competition  both  by  vendors  and  buyers,  this  is  true,  but  if  the 
VENDOR  owns  the  ENTIRE  WORLD'S— or  the  entire  locality's— supply, 
the  law  of  supply  and  demand  does  not  come  into  play,  since  it  is  demand 
alone,  or  the  buyer's  necessity,  which  fixes  the  price.  The  vice  of  the  trusts 
i-  to  substitute  for  law  of  supply  and  demand,  the  law  of  demand  merely, 
and  it  is  in  such  cases  only  that  regulation  by  law  or  by  the  courts  would 
seem    to   be   necessary." 

It  is  quite  evident,  therefore,  that  if,  as  we  know,  monopolies  do  exist, 
and  do  command  markets  and  do  regulate  prices  and  do  work  injustice, 
the  happiness  of  the  majority  of  the  citizens  of  the  United  States  is  not 
conserved.  Before  final  condemnation  is  placed,  then,  on  the  idealistic  pur- 
poses of  those  who  would  like  to  see  so-called  "private"  business  operated 
more  nearly  on  the  "square  deal"  plan,  there  are  to  be  heard  from  at  least 
many  thousand  voters  who,  apparently,  will  insist  upon  some  further  test 
of  this  bugaboo  of  paternalism.  And  it  is  of  necessity  that  we  revert  here  to 
the  significance  of  the  remarkable  demonstration  of  discontent  in  the  vote 
of  nearly  4-00,0()<)  citizens  for  E.  V.  Debs,  the  Socialist  candidate  for  Presi- 
dent in  1904.  As  has  been  pointed  out  elsewhere,  men  of  affairs  consider 
this  a  protest  against  the  mismanagement  of  business  by  our  much  lauded 
"captains  of  industry."  What  this  tendency,  running  strong  toward  Social- 
ism, will  bring  forth,  cannot  be  known  now.  Suffice  it  to  say  that  there 
are  many  clear-eyed  men  among  these  much  maligned  "cranks,"  "reformers," 
••revolutionists,"  or  what  you  phase,  who  see  the  logic  of  combination  and 
monopoly    in    business    as    definitely    as    does    the    leader    of   business    himself. 


WHAT  ARE   YOU  GOING  TO  DO  ABOUT  ITt  &3 

But   there   is  one  great   difference  between    these    class  The    captain    of 

industry  is  always  working  for  his  own  interest,  and  man \  of  his  type  will 
use  questionable  methods  it'  there  be  a  dollar  in  it.  whereas  the  "dreamer*' 
at  least  preaches  "an  equal  opportunity  for  all"  and  teaches  daily  a  working 

lesson  on  the  "square  deal." 

To  recapitulate,   we   would   record   the  tendency    of  the  times  to  !»■  about 

as   follows : 

1.     Industry    today    is   better    regulated    for   the    production   of   wealth    in 

abundance  than  ever  before  in  the  history  of  the  world.  Monopoly  and 
trusts  are  economical  and  are  lure  to  stay. 

°>.      Although    the    world    is    producing    more    than    ever    before    and    doing 
it    more   economically   than   had   been   dreamed   of   a   decade   ago.   the    inequality 
between    the    rich    and    the    poor      the    wage-earner    and    the    employer,    the    toil 
en   and   the   idle   classes,    perhaps    never   was   more   marked. 

.'3.  Coincidentally  with  this  great  inequalty,  human  being-  have  been 
turned  into  mere  machines,  men  created  in  the  image  and  likeness  <>t  God 
have  been  marred  in  soul  and  body  beyond  the  recognition  of  their  divine 
nature — all  to  the  glory  of  that  demon   Mammon. 

4.      And     still     further,    and     also    coincideiitalU     with     these     developments, 

crime  ha-  entered  to  seperate  employer  and  employ:  graft  has  crept  in  to 
trample  upon  the  legal  right-  of  citizens,  legal  murder  ha-  been  committed 
in  the  name  of  the  "divine  right  of  high  finance  and  big  business,'1  and  the 
fountainhead  of  liberty  again  ami  again  has  been  tainted  in  a  bundled  dif- 
ferent   ways. 

.-,.     H,,t    while  the  more  intelligent    people  ni  the  country,  and.  therefore, 

those     who    are     more     strictly     an-uerable     to    God     and     man     for    their    A><<\^ 

have    trodden   down   the   poor  and    laid   wa-te   tbe  home-  of   father,  mother. 

si-ter   Slid    brother,    the    populace    ha-   awakened    I.,   the   enor.mU    of   the    UH. 

6.  Remonstrance   against    the   unfairness   of   modem   business   and 
systems  has  become  general  and  the  crj    for  the  "squaw  deal"  has  gone  up 
from  almost  every  quarter  of  the  country. 

7.  While  demands  for  fair  dealing  have  been  loud  and  frequent,  action 
looking   to   amelioration   of  existing  evils   Ik.-   bee,,   somewhat    constant. 

to  the  present   this  ha-  been  instanced  principallj    through  efforts  to  en! 
existing  laws,  and   to  enlarge  the  icope  and   function  of  government.     This 
has  been  due  largely  to  the  fad   thai   constant^   business  interests  h*v, 
,,,,,,,,1  methods  to  circumvent  tbe  law  in  their  efforts  to  find  the  most  feasible 
and  economical  mean-  of  producing  wealth. 


Ul  WHAT  ARE   YOU  GOING  TO  DO  ABOUT  IT? 

v  The  broadening  of  governmental  power  has  been  seen  through  such 
of  its  phases  and  art  ion  as  aim  to  secure  municipal  ownership  of  public 
utilities,  regulation  o\'  railway,  gas  and  electric  Light  rates,  prosecution  of 
the  trusts,  etc.  This  power  has  been  combatted  fiercely  by  the  money  inter- 
ests  because   ii    threatens  ami  curtails   the   power  of   the  capitalist    class. 

}).  The  laboring  class,  through  trade  unionism,  has  tried  to  create  as 
definite  ami  tar  reaching  a  monopoly  in  Labor  as  capital  has  mule  of  natural 
resources,  and  the  tools  of  Labor.  War  has  ensued  which  both  employer  and 
employe  aggravate  1>\    unfairness. 

10.  The  public,  composed  of  both  contending  forces  and  the  middle  class, 
cries  out  upon  such  conditions  and  seeks  to  enforce  the  law  against  thuggery, 
retaliation,    bribery    and    graft. 

11.  In  the  meantime,  efforts  are  making  to  educate  all  classes  to  the 
saner  and  more  honest  use  of  the  ballot,  with  a  view  to  making  government 
the  umpire  which  shall  declare  against  unfairness  and  work  under  the  doctrine 
of  the  "square  deal." 

12.  Finally  there  appears  to  be  at  work  an  influence,  which,  if  not 
overcome  by  something  better  than  violated  promises  of  fair  treatment  for 
all  under  the  present  system  of  the  unequal  distribution  of  opportunities 
and  the  wealth  produced  by  mankind,  may  swing  one  of  the  great  political 
parties  into  changing  conditions  radically  by  the  power  of  the  ballot.  And 
the  motto  of  the  men  who  are  at  work  thus  to  accomplish  what  they  con- 
sider something  of  an  industrial  millennium,  where  happiness  for  the  many  and 
not  the  few  is  the  goal,  seems  to  be,  "Anything  that  will  promote  general 
welfare,  even  to  the  point  of  paternalism  and  community  ownership  of  the 
means  of  producing  and  distributing  wealth,  is  a  just  and  equitable  function 
of  government." 

In  conclusion,  it  must  he  said  that  all  the  ills  of  the  world  will  not  be 
cured  in  a  day.  Men  will  differ  honestly  in  opinions  and  often,  will  change 
tho>'  opinions.  Struggles  will  not  cease,  but  battles  more  and  more  will 
I*,  for  virtue's  sake.  In  reiterating  the  endorsement  of  the  new  doctrine  of 
the  "square  deal"-  new  because  men  once  more  have  come  back  to  the  old 
way  of  thinking  that  "honesty  is  the  best  policy"— ii  must  be  said  that,  inas- 
much as  this  world  i-  made  up  of  human  beings,  the  personal  equation  must 
always  he  considered  in  the  last  analysis  of  the  problems  of  mankind  and  of 
tin  "square  deal."  And  here  we  append  some  of  the  desired  things  in  this  line 
of  the  personal  equation  which  Success  believes  would  make  the  world  better 
nid    which   we   give   our  hearty   endorsement  : 


WHAT  ARE  YOU  GOING  TO  1H)  ABOUT  IT?  4^"> 

Men  who  cannot  be  bought. 

Men  whose  word  is  their  bond. 

.Men  who  put  character  above  wealth. 

Men   who   possess  opinions  and  a   will. 

.Men   who   see   the  divine   in  the  common. 

Men  who  "would  rather  be  right  than  be  president." 

Men   who  will  not  lose  their  individuality   in  a  crowd. 

Men  who  will  not  think  anything  profitable  that  is  dishonest. 

Men   who  will  be  as  honest   in  small   things  as  in   great   things. 

Men  who  will  make  no  compromise  with  questionable  things. 

Men  whose  ambitions  are  not  confined  to  their  own  selfish  desires. 

Men  who  are  willing  to  sacrifice  private  interests  tor  the  public  good. 

Men   who  are  not  afraid  to  take  chances,  who  an-  not   afraid  of  failure. 

Men  of  courage,  who  are  not   cowards  in  any   pari   of  their  natures. 

Men    who  are   larger  than   their   business,   who  overtop   their   vocation. 

Mill  who  will  give  thirty-sis  inches  for  a  yard  and  thirty-two  quarts  for  .1 

bushel. 

Philanthropists  who  will  not   let   their  right    hand  know    what    their  left    hand 

18  doing. 

Men   who   will    not    have   one  brand   of   honesty    for   business   purposes   and 

another  for  private  life. 

Young  men   who  will  be  true  to  their  highcsl    ideals  in  spite  of  the  sneers 

and    laughter   of    their   companions. 

Clergymen  who  can  hear  a  louder  call  than  that  of  public  applause,  larger 
salary  or  a  fashionable  church. 

Statesmen  who  will  not   pack  caucuse*,  pull  wires  or  he  influenced  in  then 
policy  by  personal  motives. 

Magnanimous   souls   who  do   not    look  upon  everybody    thej    meet    for  th 
possible  use  they  may  be  to  them. 

M,n  wh0  ;,,(•  true  to  their  friends  through  good  report  and  evil  report,  in 
adversitj    as  well  a.  in   prosperity. 

Single-hearted  people  who  do  not  look  at  every  proposition  from  the  point 

,  I    view    of   -"What    is   there   in    it    tor   me?M 

Journalists  who  will  ad  write  scurrilous,  scandalous  articles  merel)   because 

Iheil   editor  in  chief   wishes    them    to  do   SO. 

young  men  and  women  who  can  stand  cred   and  independent,  while  others 

how    ami    fawn   and  cringe    for   place   and    power. 


km;  WHAT  ARE   YOU  GOING  TO  DO  ABOUT  ITf 

Men  who  ilo  not  believe  that  shrewdness,  sharpness,  cunning  and  long- 
iieadedness  arc  the  best  qualities  for  winning  success. 

Merchants  who  will  not  offer  for  sale  "English  woolens"1  manufactured  in 
American  mills,  or  "Irish  linens"  made  in  New  York. 

Lawyers  who  will  not  persuade  clients  to  bring  suits  merely  to  squeeze  fees 
out   of  them,  when   they   know   very   well  that    they   have  no  chance  of  winning. 

Men  who  have  the  courage  to  do  their  duty  in  silence  and  ohscurity  while 
others  about  them  win  wealth  and  notoriety  by  neglecting  sacred  ohligations. 

Men  "ho  are  not  ashamed  or  afraid  to  stand  for  the  truth  when  it  is  un- 
popular, who  can  say  "no"  with  emphasis,  although  all  the  rest  of  the  world 
say    ""yes." 

Men  who  have  the  courage  to  wear  threadbare  clothes  and  to  live  simply 
and  plainly  if  necessary,  while  their  competitors  revel  in  luxury  purchased  by 
crooked   methods. 

Men  who  have  gained  such  complete  control  of  themselves  that  they  can 
pass  through  the  most  exasperating  situations  without  doing  or  saying  an 
unpleasant  thing,  without  losing  their  temper  or  flying  off  their  center. 

Men  who  can  stand  before  a  demagogue  and  scorn  his  treacherous  flatteries 
without  winking. 


THE  LIBRARY 
UNIVERSITY  OF  CALIFORNIA 

Santa  Barbara 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW. 


El<3 


Series  9482 


1205  00354  2964 


AA    000  748  395 


